Question

On January 1, 2017, Balises Corporation's Retained Earnings account has a balance of $300,000. During 2014, cash dividends of $20,000 were declared and stock dividends with a market value of $40,000 were declared. Net income for 2017 amounted to $90,000. On June 30, 2017, Balises Corporation issued 5,000 shares of common shares at $10 per share. What is the balance in Retained Earnings appearing on the statement of shareholders' equity on December 31, 2017?

a) $380,000
b) $420,000
c) $440,000
d) $330,000

Answer 1

The balance in the Retained Earnings account on December 31, 2017, is $380,000.

Step-by-step explanation:

To calculate the balance in the Retained Earnings account on December 31, 2017, we need to consider the changes in the account during the year. Here are the key transactions:

• Starting balance on January 1, 2017: $300,000
• Dividends declared: $20,000 (cash) + $40,000 (stock)
• Net income for 2017: $90,000
• Issuance of common shares on June 30, 2017: 5,000 shares x $10 per share = $50,000

To calculate the balance, we start with the beginning balance and add the net income. Then, we subtract the dividends declared and add the proceeds from the issuance of common shares. Using these calculations:

Starting balance + Net income - Dividends declared + Proceeds from issuance of common shares = $300,000 + $90,000 - ($20,000 + $40,000) + $50,000 = $380,000

Therefore, the balance in the Retained Earnings account on December 31, 2017, is $380,000.