Question

At December 31, 2014 Lowery Company had retained earnings of $2,384,000. During 2014 they issued stock for $98,000, and paid dividends of $34,000. Net income for 2014 was $402,000. The retained earnings balance at the beginning of 2014 was

A) $2,752,000

B) $2,016,000

C) $2,114,000

D) $2,654,000.

Answer 1

To calculate the beginning retained earnings balance for Lowery Company in 2014, subtract the net income and add the dividends to the ending retained earnings. The calculation reveals that the beginning retained earnings were $2,016,000, which corresponds to option B.

Step-by-step explanation:

To determine the retained earnings balance at the beginning of 2014, you can use the following equation:

1. Beginning Retained Earnings + Net Income - Dividends = Ending Retained Earnings

Using the information given:

1. Ending Retained Earnings (at December 31, 2014) = $2,384,000
2. Net Income for 2014 = $402,000
3. Dividends paid in 2014 = $34,000

We can rearrange the equation to solve for the Beginning Retained Earnings:

Beginning Retained Earnings = Ending Retained Earnings - Net Income + Dividends

Plugging in the values gives us:

Beginning Retained Earnings = $2,384,000 - $402,000 + $34,000

Beginning Retained Earnings = $2,016,000

Therefore, the correct answer is B) $2,016,000.