Question

The Gum Company Began the year with retained earnings 48,000 44000 shares of 1$ par common stock outstanding Sales: 200,000 Expense: 80,000 Declared and paid 0.40 per share dividend What is the retained earnings balance at year end ?

Answer 1

The Gum Company's year-end retained earnings balance is $150,400, calculated by adding the net income of $120,000 to the beginning retained earnings of $48,000, then subtracting the total dividends paid of $17,600.

Step-by-step explanation:

The question asks for the calculation of the year-end retained earnings balance for the Gum Company. The company began the year with $48,000 in retained earnings. Throughout the year, the Gum Company had sales of $200,000 and expenses of $80,000, resulting in a net income of $120,000 ($200,000 - $80,000). The next step is to account for the dividends paid. The company declared and paid a $0.40 per share dividend on 44,000 shares of stock. The total dividends paid would be $17,600 (44,000 shares * $0.40). To find the retained earnings at the end of the year, we subtract the total dividends paid from the sum of the beginning retained earnings and the net income: $48,000 + $120,000 - $17,600 = $150,400. Therefore, the retained earnings balance at the end of the year for the Gum Company is $150,400.