At the end of Year 2, retained earnings for the Baker Company was $2,650. Revenue earned by the company in Year 2 was $2,900, expenses paid during the period were $1,550, and dividends paid during the period were $950. Based on this information alone, what was the amount of retained earnings at the beginning of Year 2?
A) $3,050
B) $2,250
C) $5,800
D) $1,300

Question

Quizplus · Accepted Answer

Retained earnings at the end of Year 2 = $2,650 
Revenue earned in Year 2 = $2,900 
Expenses paid = $1,550 
Dividends paid = $950

Net income (revenue - expenses) = $2,900 - $1,550 = $1,350

Retained earnings at the beginning of Year 2 can be calculated as: 
Retained earnings at the beginning of Year 2 = Retained earnings at the end of Year 2 - Net income - Dividends 
= $2,650 - $1,350 - $950 
= $350

Therefore, the correct answer is B) $2,250.

At the End of Year 2, Retained Earnings for the Baker