Question
Asked Nov 14, 2019
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Parrish 1-3 #3

Please find the missing amount listed below. Please provide the equation and method used to find this amount. Please be specific and thorough in your explanation.

Revenue $5000

Dividends declared $ Unknown

Expenses $4000

RE 1/1 $ 8000

RE 12/31 $3000

 

 

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Expert Answer

Step 1

Retained earnings are that part of profit which is reinvested in the business. It is the amount left after deducting expenses from the income and is not distributed to the shareholders in the form of dividend. Retained earnings can be positive and negative. Positive means profit and negative means loses. The retained earnings are used by the companies to grow, become more efficient and pay off its contingent liabilities if any.

Step 2

Retained earnings are that part of profit which is reinvested in the business. It is the amount left after deducting expenses from the income and is not distributed to the shareholders in the form of dividend. Retained earnings can be positive and negative. Positive means profit and negative means loses. The retained earnings are used by the companies to grow, become more efficient and pay off its contingent liabilities if any.

Step 3

To calculate net income or loss:

Net income or loss= Revenue – Expenses

                              = $5,000 - $4,000

                              = $1,000

To calculate dividend declared:

Closing balance of RE= Opening balance of RE + Net profit – Dividend declared (When any value is shifte...

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