Consider the above statement of cash flows. If all amounts shown above are in millions of dollars, what were AOS Industries' retained earnings for 2008?
A)$5.2 million
B)$2.2 million
C)$4.4 million
D)$3.1 million

Question

Consider the above statement of cash flows. If all amounts shown above are in millions of dollars, what were AOS Industries' retained earnings for 2008?
A)$5.2 million 
B)$2.2 million 
C)$4.4 million 
D)$3.1 million

Quizplus · Accepted Answer

Retained earnings for 2008 can be calculated as follows:
Retained earnings (end of year) = Retained earnings (beginning of year) + Net income - Dividends
From the statement of cash flows, we can see that Net income is $3.7 million and dividends paid is $1.5 million. We don't have the beginning balance of retained earnings, so let's assume it was $0. 
Retained earnings (end of year) = 0 + 3.7 - 1.5 = 2.2 million. Therefore, the answer is B.

Consider the Above Statement of Cash Flows