Question

The following items were taken from the financial statements of Wyatt Company. (All dollars are in thousands.)

2015 net income was $1,000 and dividends paid were $700.
What was Wyatt Company's retained earnings balance at the end of 2015?
a. $1,000
b. $700
c. $300
d. $2,000

Answer 1

The retained earnings balance for Wyatt Company at the end of 2015 was $300, calculated by subtracting the dividends paid ($700) from the net income ($1,000) for that year.

Step-by-step explanation:

The question asks about the retained earnings balance at the end of 2015 for Wyatt Company. Retained earnings represent the cumulative amount of net income that has been saved by the company and not distributed to shareholders through dividends. To calculate retained earnings at the end of a period, we start with the retained earnings at the beginning of the period, add the net income for the period, and subtract any dividends paid out during the period.

In this case, the net income for Wyatt Company in 2015 was $1,000 and the dividends paid were $700. If we assume that there were no other changes to retained earnings during 2015, retained earnings at the end of 2015 would be the net income of $1,000 minus the dividends paid of $700, which equals $300.

Therefore, the retained earnings balance for Wyatt Company at the end of 2015 was $300 thousand.