Question

The Dayton Corporation began the current year with a retained earnings balance of $32,000. During the year, the company corrected an error made in the prior year, which was a failure to record depreciation expense of $3,000 on equipment. Also, during the current year, the company earned net income of $12,000 and declared cash dividends of $7,000. Compute the year-end retained earnings balance.
A. $34,000
B. $37,000
C. $41,000
D. $44,000

Answer 1

Answer:

A. $34,000

Explanation:

The formula to compute the year-end retained earnings balance is shown below:

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

= $32,000 +$12,000 - $3,000 - $7,000

= $34,000

The depreciation expenses and dividend are deducted and the net income is added to the beginning balance of retained earning account so that the accurate amount can come.