Question

The first year of operations for a company was Year 1. The net income for Year 1 was $20,200 and dividends of $12,100 were paid. In Year 2, the company reported net income of $34,200 and paid dividends of $5,100. At the end of Year 1, the company had total assets of $152,000. At the end of Year 2, the company had total assets of $ $242,000. What is the amount of retained earnings at the end of Year 2

Answer 1

$37,200

Step-by-step explanation:

The amount of retained earnings is calculated by using the formula below;

Amount of retained earnings = Net income - Dividends paid

In year 1, the amount of retained earnings

= $20,200 - $12,100

= $8,100

In year 2, the amount of retained earnings

= $34,200 - $5,100

= $29,100

Therefore, the amount of retained earnings at the end of year 2

= Amount of retained earnings for year 1 + Amount of retained earnings for year 2

= $8,100 + $29,100

= $37,200