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A company has a net income of $120,000 and dividends of $30,000. What is the ret

Practice Questions

Q1
A company has a net income of $120,000 and dividends of $30,000. What is the retained earnings at the end of the year?
  1. $90,000
  2. $120,000
  3. $150,000
  4. $180,000

Questions & Step-by-Step Solutions

A company has a net income of $120,000 and dividends of $30,000. What is the retained earnings at the end of the year?
  • Step 1: Identify the net income of the company, which is $120,000.
  • Step 2: Identify the total dividends paid by the company, which is $30,000.
  • Step 3: Use the formula for retained earnings: Retained Earnings = Net Income - Dividends.
  • Step 4: Substitute the values into the formula: Retained Earnings = $120,000 - $30,000.
  • Step 5: Calculate the result: $120,000 - $30,000 = $90,000.
  • Step 6: The retained earnings at the end of the year is $90,000.
  • Retained Earnings Calculation – Retained earnings represent the portion of net income that is retained in the company after dividends are paid out.
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