Night Scapes, Corp. began the year 2013 with $10 million in retained earnings. The firm suffered a net loss of $2 million in 2013 and yet paid $2 million to its preferred stockholders and $1 million to its common stockholders. What is the year-end 2013 balance in retained earnings for Night Scapes?

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The beginning retained earnings were $10 million. The net loss of $2 million reduces this to $8 million. After paying $2 million to preferred stockholders and $1 million to common stockholders, the retained earnings further decrease by $3 million, resulting in a year-end balance of $5 million.