Grass Gadgets had sales of $30 million and net income of $2 million in 2008.Grass paid a dividend of $1.5 million.Assuming that their beginning balance for retained earnings was $3 million,calculate their ending balance for retained earnings.
A)$2.5 million
B)$3 million
C)$3.5 million
D)$4 million

Question

Quizplus · Accepted Answer

Retained earnings = Beginning balance + Net income - Dividends
Retained earnings = $3 million + $2 million - $1.5 million
Retained earnings = $3.5 million

Therefore, the ending balance for retained earnings is $3.5 million. Option C is the correct answer.

Grass Gadgets Had Sales of $30 Million and Net Income