Question

Given that Jacob's Chocolates Company had beginning retained earnings of $4,000; net income during the period of $10,000; and dividends of $300. calculate the ending balance in the retained earnings account.

Answer 1

Answer: Ending Balance (retained income) = $13700

Explanation:

Retained income is the net income/profit that is re-invested back into the company after paying dividends to the shareholders

of the company. Net income is re-invested back into to business in order for the business to be able to grow. Retained income account will  therefore reflect the accumulated balance of profits that have been re-invested back to the company.

The closing balance of the retained income is calculated by taking the opening balance  add net income/net profit for the year and subtract dividends paid.

calculation of Retained Income closing Balance

Opening Balance = $4000

Net Income for the year = $10000

Dividends paid  = 300

Closing Balance = 4000 + 10000 - 300 = 13700

The Retained income closing Balance = $13700

Answer 2

Answer:

$13.700

Explanation:

The net income that it's not paid in dividens it's keep as retained earnings, so in this situation the $4.000 initial retained earnings plus $10.000 of the net income generated during the year and minus the $300 paid in dividends gives a total amount of $13.700.