Cost of the asset$100,000
Life of the asset 5 years
Depreciation rate20%
Capital cost allowance rate 50%
Residual value of the asset nil
Income tax rate 50%
-What do retained earnings represent?
A) the net profit generated by a business less the dividends declared
B) a non-current liability
C) the earnings paid to shareholders
D) a current liability

Question

Cost of the asset$100,000 
Life of the asset 5 years 
Depreciation rate20% 
Capital cost allowance rate 50% 
Residual value of the asset nil 
Income tax rate 50%
-What do retained earnings represent?
A) the net profit generated by a business less the dividends declared
B) a non-current liability
C) the earnings paid to shareholders
D) a current liability

Quizplus · Accepted Answer

Retained earnings represent the portion of net profit that a company retains rather than distributing it to shareholders as dividends. It is essentially the cumulative amount of earnings not paid out as dividends but reinvested in the business or kept as a reserve for specific objectives.

Cost of the Asset$100,000