Night Scapes, Corp. began the year 2018 with $10 million in retained earnings. The firm suffered a net loss of $2 million in 2018 and yet paid $2 million to its preferred stockholders and $1 million to its common stockholders. What is the year-end 2018 balance in retained earnings for Night Scapes?
A) $5 million
B) $8 million
C) $9 million
D) $15 million

Question

Quizplus · Accepted Answer

The year-end 2018 balance in retained earnings for Night Scapes is calculated by starting with the beginning balance of $10 million, subtracting the net loss of $2 million, and then subtracting the dividends paid to both preferred and common stockholders ($2 million + $1 million = $3 million). Thus, $10 million - $2 million - $3 million = $5 million.