Question

2016 2017 2018 Net Income $1,200 ($500) $2,300 Net Cash Flows $500 $300 $2,800 Dividends $200 $0 $200 Issuance of Stock $2,000 $0 $0 The above amounts represent totals from the first three years of operations. Calculate the balance of Retained Earnings at the end of 2018.

Answer 1

Answer:

$2,600

Explanation:

We will have to focus on the annual result and the dividends that were paid because these dividends decreases the retained earnings. There is no impact of can flow while insurance of stock falls withing result for the year.

In 2016, income was $1,200 minus dividends allocated $200

= $1,200 - $200

Retained earnings= $1,000

2017 result of ($500) without dividend distribution;

Retained earnings = ($500)

2018, result of $2,300 and distribution dividends of $200

= $2,300 - $200

Retained earnings= $2,100

Total retained earnings =$1,000 + (500) + $2,100

= $2,600