Final answer:
The correct calculation of ending retained earnings for the year 2022, given the beginning retained earnings, dividends paid, and net income for Babble, Inc., is $550,000. This is computed by adding the net income to the beginning retained earnings and then subtracting the dividends paid.
Step-by-step explanation:
The student has asked about how to calculate ending retained earnings for the year 2022. Retained earnings represent the cumulative amount of earnings that a company has kept within the business after paying out dividends to shareholders. The formula to calculate the ending retained earnings is:
Ending Retained Earnings = Beginning Retained Earnings + Net Income - Dividends Paid
If we apply this formula to the given figures:
- Beginning Retained Earnings (2022) = $500,000
- Dividends Paid (2022) = $25,000
- Net Income (2022) = $75,000
We get:
Ending Retained Earnings = $500,000 + $75,000 - $25,000
Ending Retained Earnings = $550,000
Therefore, the correct answer to the student's problem is option (d) $550,000.