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 amount the company retains after paying dividends
B) the amount the company retains after paying the cost of sales
C) the amount shareholders retain after paying their taxes
D) the amount the company retains after paying its operating expenses

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 amount the company retains after paying dividends
B) the amount the company retains after paying the cost of sales
C) the amount shareholders retain after paying their taxes
D) the amount the company retains after paying its operating expenses

Quizplus · Accepted Answer

Retained earnings represent the portion of net income that a company keeps (retains) after paying out dividends to its shareholders. It is essentially the cumulative amount of earnings not distributed as dividends but reinvested in the business or kept as a reserve for specific objectives.

Cost of the Asset$100,000