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?
A)$2,000.
B)$2,500.
C)$3,500.

Question

Quizplus · Accepted Answer

Retained earnings are calculated by adding net income to the previous period's retained earnings and then subtracting any dividends paid out. Over three years, the company earns $1,000 + $2,000 + $3,000 = $6,000 and pays out $500 + $1,000 + $1,000 = $2,500 in dividends. Thus, the retained earnings at the end of the third year are $6,000 - $2,500 = $3,500.

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