Grason Corporation is preparing a budgeted balance sheet for 2018. The retained earnings balance at December 31, 2017 was $533,500. The 2015 budgeted income statement shows expected net income of $112,000. The company expects to declare dividends during 2018 amounting to $40,000. The expected balance in retained earnings on the 2018 budgeted balance sheet is:
A) $533,500.
B) $605,500.
C) $645,500.
D) $493,500.
E) $685,500.

Question

Quizplus · Accepted Answer

The expected balance in retained earnings is calculated by adding the net income for 2018 to the retained earnings at the end of 2017 and then subtracting the dividends declared in 2018: $533,500 + $112,000 - $40,000 = $605,500.

Grason Corporation Is Preparing a Budgeted Balance Sheet for 2018