Question

11.Jones and company had a balance in their retained earnings account at the end of 2020 in the amount of 990,000. They have forecasted net income in 2021 in the amount of 350,000. They pay an estimated 40% of their net income in dividends. What will be the addition to retained earnings at the end of 2021. What will be the ending balance in retained earnings at the end of 2021

Answer 1

$210,000 and $1,200,000

Step-by-step explanation:

The computation is shown below:

Given that

Ending Balance in retained earnings = $990,000

Net income = $350,000

Dividend paid in 2021 is

= 40% of net income

= 40% of $350,000

= $140,000

So, the Addition to retained earning is

= Net income - dividends

= $350,000 - $140,000

= $210,000

Now the ending balance in retained earnings is

= Beginning balance in retained earnings + addition to retained earnings

= $990,000 + $210,000

= $1,200,000