Davis Construction Inc.
Davis Construction began operation on January 1, 2012, with an initial investment of $100,000 from each of its three stockholders. During the year ending 2012 Davis Construction had net income of $125,000 and paid dividends of $50,000.
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Refer to the information provided for Davis Construction, Inc. and calculate its retained earnings balance at December 31, 2012.

Question

Davis Construction Inc. 
Davis Construction began operation on January 1, 2012, with an initial investment of $100,000 from each of its three stockholders. During the year ending 2012 Davis Construction had net income of $125,000 and paid dividends of $50,000.
-
Refer to the information provided for Davis Construction, Inc. and calculate its retained earnings balance at December 31, 2012.

Quizplus · Accepted Answer

Retained earnings are calculated as the initial retained earnings (which is $0 at the start), plus net income ($125,000), minus dividends paid ($50,000). Thus, retained earnings at December 31, 2012, are $125,000 - $50,000 = $75,000.