If a company has a deficit in retained earnings:
A)then retained earnings has a credit balance.
B)the deficit is subtracted to determine total stockholders' equity on the balance sheet.
C)the deficit is added to determine total stockholders' equity on the balance sheet.
D)then the corporation's lifetime earnings exceed lifetime losses and dividends.

Question

Quizplus · Accepted Answer

A deficit in retained earnings means that the company has accumulated losses or distributed more dividends than the total amount of earnings retained. This deficit is subtracted from the other components of stockholders' equity such as common stock and additional paid-in capital to calculate the total stockholders' equity on the balance sheet.

If a Company Has a Deficit in Retained Earnings