Chambers Corporation has total assets of $800,000 as of December 31, 2017 and total liabilities of $400,000. Contributed capital as of December 31, 2016 and December 31, 2017 is $150,000. Chambers Corporation incurred a $50,000 net loss for the year ended December 31, 2017. If Chambers declared and paid $80,000 in dividends in 2017, its retained earnings at the beginning of 2017 would have been.

Question

Quizplus · Accepted Answer

Retained earnings = Total assets - total liabilities - contributed capital - net loss - dividends
Retained earnings = $800,000 - $400,000 - $150,000 - $50,000 - $80,000
Retained earnings = $120,000
Retained earnings at the beginning of 2017 would have been:
Retained earnings at the beginning of 2017 = Retained earnings + net loss - dividends
Retained earnings at the beginning of 2017 = $120,000 - $50,000 - $80,000
Retained earnings at the beginning of 2017 = $-10,000
However, retained earnings cannot be negative. Therefore, the correct answer is C) $380,000, which is the closest option to the calculated answer without being negative.

Chambers Corporation Has Total Assets of $800,000 as of December