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 a depreciation expense of $3,000 on equipment. Also, during the current year, the company earned a net income of $12,000 and declared cash dividends of $7,000. Compute the year-end retained earnings balance.

Answer 1

Answer:

$34,000

Explanation:

To determine the year-end retained earnings balance we can use the following formula:

current retained earnings balance = last year's retained earnings balance + current net income - distributed dividends - adjustments (depreciation expense)

current retained earnings balance = $32,000 + $12,000 - $7,000 - $3,000

current retained earnings balance = $34,000