Ajax Company was founded in 2009. Its yearly earnings are shown here:
2012: Net income of $4,000
2013: Net income of $23,000
2014: Net income of $2,000
2015: Net loss of $30,000
No dividends were paid. At the end of the year 2015, Ajax would have a Retained earnings deficit of $1,000.

Question

Quizplus · Accepted Answer

Retained Earnings = Net Income (or Loss) - Dividends
Total Retained Earnings = (4000+23000+2000-30000) - 0 = $1000
Since the question states that there is a Retained Earnings deficit of $1000, it means that Total Retained Earnings is negative. Therefore, option A is correct.

Ajax Company Was Founded in 2009