At September 1, 2017, Baxter Inc. reported Retained Earnings of $423,000. During the month, Baxter generated revenues of $60,000, incurred expenses of $36,000, purchased equipment for $15,000 and paid dividends of $6,000. What is the balance in Retained Earnings at September 30, 2017?

Question

Quizplus · Accepted Answer

The balance in Retained Earnings is calculated by adding net income and subtracting dividends from the beginning Retained Earnings. Net income is revenues minus expenses, which is $60,000 - $36,000 = $24,000. The new Retained Earnings is $423,000 + $24,000 - $6,000 = $441,000.