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    scabslb's Avatar
    scabslb Posts: 1, Reputation: 1
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    #1

    Sep 10, 2014, 12:41 PM
    How to find retained earinings only knowing net income
    Landon Corporation was organized on January 2, 2012, with the investment of $100,000 by each of its two stockholders. Net income for its first year of business was $85,200. Net income increased during 2013 to $125,320 and to $145,480 during 2014. Landon paid $20,000 in dividends to each of the two stockholders in each of the three years. What are the retained earnings for Jan 1st 2014 and Dec 31st 2014?
    pready's Avatar
    pready Posts: 3,197, Reputation: 207
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    Sep 10, 2014, 01:08 PM
    First find retained earnings for Jan 1 2013, so start with your investment on Jan 2 2012 plus net income for the first year(2012) minus dividends for the first of three years equals Jan 1 2013 retained earnings.

    Now start with Jan 1 2013 retained earnings plus net income during 2013 minus dividends for the second year of three years equals Jan 1 2014 retained earnings.

    Finally start with Jan 1 2014 retained earnings plus net income during 2014 minus dividends for the third year of three years equals Dec 31 2014 and Jan 1 2015 retained earnings.
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