Question

Lorna just finished compiling her company’s income statement for the month ended March 31. Her next step in preparing the company’s financial statements should be to A : subtract the company’s net income for March from the company’s retained earnings as of March 31. B : subtract the company’s net income for March from the company’s retained earnings as of March 1. C : add the company’s net income for March to the company’s retained earnings as of March 31. D : add the company’s net income for March to the company’s retained earnings as of March 1.

Answer 1

Answer:

D : add the company’s net income for March to the company’s retained earnings as of March 1.

Explanation:

After preparing the income statement, the next step is to add the net income at the beginning retained earnings balance to find out the ending retained earnings balance.

The ending balance of retained earning = Beginning balance of retained earnings + net income - dividend paid

Thus, all other options are incorrect except option D