On December 31, 2008, the Bison Bit Company's Retained Earnings account had a balance of $415,000. During 2008, the company incurred a net loss of $87,000, declared stock dividends of
$16,000, and paid cash dividends of $9,000. If the Dividends Payable account increased $3,500 during 2008, the January 1, 2008, balance in the Retained Earnings account was:

Question

Quizplus · Accepted Answer

To find the January 1, 2008 balance, start with the December 31, 2008 balance of $415,000. Add back the net loss of $87,000, stock dividends of $16,000, and cash dividends of $9,000. Since Dividends Payable increased by $3,500, only $5,500 of the cash dividends were paid, so add back $3,500. The calculation is: $415,000 + $87,000 + $16,000 + $3,500 = $530,500.