For the first three years of operations,the company reports net income of $1,000,$2,000,and $3,000,and pays dividends of $500,$1,000,and $1,000.What is the balance of retained earnings at the end of the third year?

Question

Quizplus · Accepted Answer

The balance of retained earnings can be calculated by adding the net income and subtracting the dividends for each year. 
Year 1: Retained earnings = $1,000 - $500 = $500 
Year 2: Retained earnings = ($1,000 + $500) - $1,000 = $500 
Year 3: Retained earnings = ($3,000 + $500 + $500) - $1,000 = $3,000 
Therefore, the balance of retained earnings at the end of the third year is $3,500 (Option C).

For the First Three Years of Operations,the Company Reports Net