The statement of retained earnings for Redwood Systems Ltd. shows a retained earnings balance of $300 million on December 31, 2016. In 2016, Redwood had a net income of $60 million and the firm had paid dividends of $20 million to its stockholders. What was the beginning balance of retained earnings for Redwood on January 1, 2016?
A) $300 million
B) $260 million
C) $380 million
D) $340 million
E) $220 million

Question

Quizplus · Accepted Answer

The beginning balance of retained earnings is calculated by adding the net income and subtracting the dividends from the ending balance of retained earnings. Therefore, the beginning balance of retained earnings for Redwood on January 1, 2016, is $300 million + $60 million - $20 million = $260 million.

The Statement of Retained Earnings for Redwood Systems Ltd