Question

Cheyenne Company started the year with $52800 in its Common Stock account and a balance in Retained Earnings of $38700. During the year, the company earned net income of $42200 and declared and paid $17600 of dividends. In addition, the company sold additional common stock amounting to $24600. As a result, the amount of its retained earnings at the end of the year would be

Answer 1

$63,300

Step-by-step explanation:

ending balance of retained earnings account = beginning balance + net income - dividends paid = $38,700 + $42,200 - $17,600 = $63,300

Any issuance of common stocks will increase common stock account and possibly additional paid in capital, increasing total stockholders' equity but it will not increase retained earnings.