Question

A company's retained earnings at the beginning of the year is $1 million. It paid $100,000 in dividends, had $250,000 in net income, and its goodwill increased by $10,000. What is its retained earnings as of the end of the year?

Answer 1

Answer: $1,160,000

Explanation:

Given:

Retained earnings (beginning) = $1 million

Dividend paid = $100,000

Net income = $250,000

Goodwill increased by = $10,000

Therefore, we'll compute Retained earnings (end of the year) as:

Retained earnings (end of the year) = Retained earnings (beginning) + Net income + Increase in Goodwill - Dividend paid

Retained earnings (end of the year) =  $1,000,000 + $250,000 + $10,000 - $100,000

Retained earnings (end of the year) = $1,160,000