Question

For the current financial year a hotel had $350,000 in its retained earnings account at the beginning of the year. During the year it earned $80,000 in profit and paid $32,000 in dividends to its owners. The balance sheet at the end of the current financial year should reflect a retained earnings balance of: A.$430,000. B.$318,000. C.$398,000. D.$48,000. E.$80,000.

Answer 1

The correct option is C.$398,000.

Step-by-step explanation:

This can be determined as follows:

Retained earnings for the year = Profit earned during the year – Dividend paid to the owners = $80,000 - $32,000 = $48,000

Ending retained earnings = Beginning retained earnings + Retained earnings for the year = $350,000 + $48,000 = $398,000

This implies that the balance sheet at the end of the current financial year should reflect a retained earnings balance of $398,000.

Therefore, the correct option is C.$398,000.