Question

Last year Builtrite had retained earnings of $140,000. This year, Builtrite had true net profits after taxes of $65,000 which includes common stock dividends received of $10,000, and also paid a preferred dividend of $35,000. What is Builtrite’s new level of retained earnings? A) $180,000 B) $190,000 C) $200,000 D) $170,000

Answer 1

Answer: $160,000

Explanation: Retained earnings can be defined as the amount pf earnings left with the company after taking into consideration all tyoes of dividends and taxes.

formula :-

Retained earnings = previous retained earnings + net income - dividends to equity holders - dividends to preference holders

thus,

Retained earnings = $140,000 + $65,000 - $10,000 - $35,000

= $160,000