Retained Earnings

Concept: Retained Earnings and the BASE Formula


Example: Retained Earnings and the BASE Formula


Problem: On January 1, 2018, XYZ Company had a balance of retained earnings of $420,000. During 2018, the company earned net income of $205,000 and also paid dividends. If the balance of retained earnings on December 31, 2018 was $340,000, how much was paid in dividends?


Retained Earnings Additional Practice Problems

What are the normal balances for Dividends and Retained Earnings?

a. Both are Debit

b. Both are Credit

c. Dividends is a Debit while Retained earnings is a Credit

d. Dividends is a Credit  while Retained earnings is a Debit

Watch Solution

Retained Earnings is classified as which type of account?

A) asset

B) liability

C) stockholders' equity

D) expense

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The beginning balance of retained earnings was $7,500. The dividends paid to stockholders' were $1,500. The ending balance of retained earnings is $5,000. What was the net income or net loss for the accounting period? 

A) net loss of $1,000

B) net income of $1,000

C) net loss of $2,000

D) net income of $2,500

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Retained earnings refers to:

A) the amount reported as "the bottom line" on the income statement

B) the accumulated amount of past earnings that have not been distributed to stockholders as dividends

C) the total amount of stockholders' equity for a corporation

D) the amount that stockholders have invested by purchasing a corporation's stock

E) the amount that stockholders have invested by purchasing a corporation's stock, less the amount of dividends they have received.

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Net income for The Yellow Submarine, Inc. was understated in 2005 by $110,000. The entry to record the correction in 2006 includes a:

a. Debit to Retained Earnings

b. Credit to Retained Earnings

c. Debit to Income Summary

d. Credit to Income Summary

Watch Solution

Retained earnings will change over time because of several factors. Which of the following factors would explain an increase in retained earnings?

a. Net loss.

b. Net income.

c. Dividends.

d. Investments by stockholders

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Retained earnings had a beginning balance of $40,000 and a post closing balance of $65,000. If net income was $37,000, dividends for the year were

a) $68,000

b) $62,000

c) $12,000

d) $68,000

Watch Solution