Question

The following selected amounts are available for Thomas Company.Retained earnings (beginning) $2,500Net loss 200Cash dividends declared 200Stock dividends declared 200What is its ending Retained Earnings balance?a. $2,200.b. $2,300.c. $1,900.d. $2,100.

Answer 1

c. $1,900

Step-by-step explanation:

As for the information provided, we have:

Retained Earnings opening balance = $2,500

Current year loss = $200

Balance of retained earnings after this = $2,500 - $200 = $2,300

Now, dividends are provided which shall be paid from retained earnings only.

Cash dividends are the one paid in cash.

Stock dividends are the ones which are paid by issue extra shares from retained earnings.

Thus, both are deductible from retained earnings.

Therefore, closing balance of retained earnings = $2,300 - $200 - $200 = $1,900.