The statement of retained earnings for Redwood Systems Ltd. shows a retained earnings balance of $300 million on December 31. During the year, Redwood generated net income of $60 million and paid dividends of $20 million to its stockholders. What was the beginning balance of retained earnings at the start of this year?
A)$300 million
B)$260 million
C)$380 million
D)$340 million
E)$220 million

Question

Quizplus · Accepted Answer

The beginning balance of retained earnings can be calculated using the following formula: 
Beginning retained earnings + Net income - Dividends = Ending retained earnings 
Substituting the given values, we get: 
Beginning retained earnings + $60 million - $20 million = $300 million 
Simplifying the equation, we get: 
Beginning retained earnings = $260 million

The Statement of Retained Earnings for Redwood Systems Ltd