Question

Henson Company began the year with retained earnings of $330,000. During the year, the company recorded revenues of $500,000, expenses of $380,000, and paid dividends of $40,000. What was Henson’s retained earnings at the end of the year?

Answer 1

Answer:

Henson’s retained earnings at the end of the year was $410,000

Explanation:

Ending balance in retained earnings is calculated by using following formula:

Ending balance in retained earnings = Beginning balance in retained earnings + Net income - Cash dividends - Stock dividends

Henson Company began the year with retained earnings of $330,000.

The company paid dividends of $40,000

Henson's Net income = Revenues - Expenses = $500,000 - $380,000 = $120,000

Ending balance in retained earnings = $330,000 + $120,000 - $40,000 = $410,000