Laslow Inc began the year with a balance in retained earning

Laslow, Inc. began the year with a balance in retained earnings of $21,000 and 40,000 shares of $1 par common stock outstanding. During the year, the company reported sales of $122,500, expenses of $101,000, and declared and paid a $0.20 per share cash dividend. How much is the balance in the Retained Earnings account at the end of the year?

Solution

Dividends paid=40000 shares*$0.2=$8000

Hence addition to retained earnings=Sales-Expenses-Dividends paid

=(122500-101000-8000)=$13500

Hence ending retained earnings=Beginning retained earnings+addition to retained earnings

=(21000+13500)=$34500.