Question

In its first three years of operations, a company has net income of $2,000; $5,000; and $8,000. It also pays dividends of $1,000 in the second year, and $3,000 in the third year. What is the balance of Retained Earnings at the end of the third year?

Multiple Choice
a. $5,000.
b. $11,000.
c. $4,000.
d. $15,000.

Answer 1

b. $11,000

Step-by-step explanation:

You would add the net income

2,000+5,000+8,000 = 15,000

and subtract the dividends

15,000-1,000=14,000-3,000=11,000