Question

Wave Corporation began the current year with a retained earnings balance of $25,000. During the year, the company corrected an error made in the prior year, which was a failure to record depreciation expense of $5,000 on equipment. Also, during the current year the company earned net income of $15,000 and declared cash dividends of $5,000. Compute the year-end retained earnings balance.
a. $40,000
b. $35,000
c. $25,000
d. $30,000

Answer 1

Answer:

=$ 30,000.00

Explanation:

Retained earning represents profits that have not been distributed to shareholders.

Opening balance    $ 25,000.00

Less previous depreciation           $   5,000.00

Actual balance             $ 20,000.00

for the current  year: Net income $ 15,000.00

less depreciation      $  5,000.00

                                                         $ 10,000.00

Balance at the end of year = $ 20,000.00 +$10,000.00

     =$ 30,000.00