Question

The first year of operations for a company was Year 1. The net income for Year 1 was $21,100 and dividends of $12,550 were paid. In Year 2, the company reported net income of $35,100 and paid dividends of $5,550. At the end of Year 1, the company had total assets of $161,000. At the end of Year 2, the company had total assets of $ $251,000. What was the amount of retained earnings at the end of Year 1?

Answer 1

Amount of retained earnings at the end of Year 1 was $8,550

Explanation:

In Year 1

net income= $21,100

dividends = $12,550

In Year 2

Net income = $35,100

Paid dividends = $5,550

At the end of Year 1, the company had total assets of $161,000

At the end of Year 2, the company had total assets of $ $251,000

Retained Earning at the end of Year 1 = Opening balance + Net Income - Dividend paid

Retained Earning at the end of Year 1 = 0 + 21,100 - 12,550 = 8550