At the beginning of 2015, Flaherty Company had retained earnings of $350,000. During the year Flaherty reported net income of $100,000, sold treasury stock at a "gain" of $36,000, declared a cash dividend of $60,000, and declared and issued a small stock dividend of 3,000 shares ($10 par value) when the fair value of the stock was $20 per share. The amount of retained earnings available for dividends at the end of 2015 was

Question

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The retained earnings at the end of 2015 is calculated as follows: Starting retained earnings of $350,000 plus net income of $100,000 minus cash dividends of $60,000 minus the stock dividend (3,000 shares x $20 fair value = $60,000). Therefore, $350,000 + $100,000 - $60,000 - $60,000 = $330,000. The gain from selling treasury stock does not affect retained earnings.

At the Beginning of 2015, Flaherty Company Had Retained Earnings