Question

On January 1, Bennett Corporation had retained earnings of $650,000. During the year, Bennett Corporation had the following selected transactions: declared cash dividends of $100,000; placed a restriction on retained earnings for a plant expansion of $50,000; earned net income of $400,000; and declared stock dividends of $50,000. The ending balance for retained earnings is:

Answer 1

Answer:

The ending balance for Retained Earnings is $850,000.

Explanation:

Statement of Retained Earnings

Retained Earnings balance at Start                   650,000

Add: Net Income                                                 400,000

Total Retained Earnings                                     1,050,000

Less: Declared Cash Dividends                          (100,000)

         Restriction for plant expansion                  (50,000)

          Declared Stock Dividend                           (50,000)

Retained Earnings at end                                    850,000

Answer 2

Answer:

retained earnings = $900,000

Explanation:

retained earning account:

• beginning balance    $650,000
• + net income              $400,000
• - cash dividends       ($100,000)
• - stock dividends       ($50,000)
• ending balance         $900,000

The corporation also set a restriction on retained earnings ($50,000), but it hasn't used the money yet for the plant expansion. Only after the money is spent will retain earnings decrease by that amount.