Question

A company has retained earnings of $94,000 as of December 31, 2014. The Pro-forma income statement projects net income of $22,000 for 2015. The company expects to declare their annual dividend on March 15, 2015 of $0.70 per share and has a total of 100,000 shares outstanding.What will the projected retained earnings account be as of December 31, 2015?a. $186,000 b. $46,000 c. $16,000 d. $2,000

Answer 1

b. $46,000

Step-by-step explanation:

The computation of the projected retained earnings is shown below:

The ending balance of retained earning = Beginning balance of retained earnings + net income - dividend paid

where,

Dividend = 100,000 shares × $0.70 = $70,000

The other items values would remain the same

So, the projected retained earnings would be

= $94,000 + $22,000 - $70,000

= $46,000