Refer to the information above. After closing the accounts, Retained earnings at December 31 equals:
A) $11,000.
B) $7,250.
C) Zero.
D) $22,250.

Question

Quizplus · Accepted Answer

The retained earnings are calculated as Beginning retained earnings + Net income/loss - Dividends. Here, beginning retained earnings were $12,000, net income was $6,500 and dividends were $11,250 ($1,500 + $9,750). Therefore, Retained earnings at December 31 equals ($12,000 + $6,500 - $11,250), which is $7,250.

Refer to the Information Above