On December 31, 2010, the balance in retained earnings is $20,000. On December 31, 2011, the balance in retained earnings is $19,100. During 2011, dividends of $4,000 were declared and paid. What is the amount of net income for 2011?

Question

Quizplus · Accepted Answer

The change in retained earnings from 2010 to 2011 is ($19,100 - $20,000) = $(900) which represents the amount of net loss for the year. Dividends of $4,000 were paid, which reduces the amount of retained earnings further. Therefore, the net income for the year must be the amount of the net loss minus the dividends paid: $(900) - $4,000 = $3,100. Therefore, the correct answer is B.

On December 31, 2010, the Balance in Retained Earnings Is