Which of the following will increase a company's retained earnings?

Question

Quizplus · Accepted Answer

Retained earnings reflect the portion of net income that is kept within the company after dividends are paid out. Therefore, earning net income of $50,000 for the year will increase a company's retained earnings. Issuing additional shares of common stock at a price above par would increase the company's common stock and paid-in capital accounts, not its retained earnings. Buying additional shares of treasury stock reduces a company's stockholders' equity, including retained earnings, because it represents a use of cash. Declaring cash dividends reduces a company's retained earnings, as this is an outflow of cash to shareholders.

Which of the Following Will Increase a Company's Retained Earnings