Clowns-R-Us reported the following in the statement of comprehensive income for the year ended December 31: During the year,the company paid $105,000 in dividends and purchased treasury stock with a par value of $20,000 at a cost of $95,000.If the balance of Retained Earnings at the beginning of the year was $4,400,000,what is the balance of Retained Earnings at the end of the year?
A)$5,145,000
B)$5,050,000
C)$4,805,000
D)$4,710,000

Question

Clowns-R-Us reported the following in the statement of comprehensive income for the year ended December 31:  During the year,the company paid $105,000 in dividends and purchased treasury stock with a par value of $20,000 at a cost of $95,000.If the balance of Retained Earnings at the beginning of the year was $4,400,000,what is the balance of Retained Earnings at the end of the year?
A)$5,145,000 
B)$5,050,000 
C)$4,805,000 
D)$4,710,000

Quizplus · Accepted Answer

The balance of retained earnings at the end of the year can be calculated as follows:

Retained Earnings at beginning of the year = $4,400,000
Add: Net Income for the year = $630,000 ($595,000 + $35,000)
Less: Dividends paid = $105,000
Less: Cost of Treasury Stock = $95,000
Retained Earnings at end of the year = $4,830,000 ($4,400,000 + $630,000 - $105,000 - $95,000)

Therefore, the best choice is C, $4,805,000.

Clowns-R-Us Reported the Following in the Statement of Comprehensive Income