Willie Company's retained earnings increased $20,000 during the current year.What was Willie's current year net income or loss given that Willie declared $25,000 of dividends during this year?

Question

Quizplus · Accepted Answer

Retained earnings increase is calculated by adding net income to the beginning balance of the retained earnings and subtracting any dividends paid. Therefore: retained earnings increase = net income - dividends paid. Rearranging the equation, we get net income = retained earnings increase + dividends paid. Substituting the values given: net income = $20,000 + $25,000 = $45,000.

Willie Company's Retained Earnings Increased $20,000 During the Current Year