I am really confused on how to calculate retained earnings balance as of 12/31/2008:confused: The info given is:

Retained earnings 12/31/09 490,400
Net decrease in total assets during 2009 74,800
Net increase in accounts receivable in 2009 17,200
Dividends declared and paid in 2009 67,200
Proceeds from issuance of bonds during 2009 176,800
Net loss for the year ended 12/31/09 46,000

Retained earnings changes by these effects:

Net profits increase RE;
Losses decrease RE;
Dividends decrease RE.

So just remember this sequence of how RE would change across any given year:

RE at the beginning of a year,
plus the net profit for the year (or minus the net loss for the year),
minus any dividends paid out during the year,
Equals the RE at the end of the year.

If you're provided any three of these four amounts (which you are, in your info), you can easily determine the fourth. Go get 'em.

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Originally Posted by ArcSine

Retained earnings changes by these effects:

Net profits increase RE;
Losses decrease RE;
Dividends decrease RE.

So just remember this sequence of how RE would change across any given year:

RE at the beginning of a year,
plus the net profit for the year (or minus the net loss for the year),
minus any dividends paid out during the year,
equals the RE at the end of the year.

If you're provided any three of these four amounts (which you are, in your info), you can easily determine the fourth. Go get 'em.

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Well done, but what is the significance pf other items such as increase in Accounts Receivable, decrease in total assets, issue of bonds. I have a feeling that there is some catch. Perhaps Justice22 may prefer to submit his answer for cirrection.

Yes, that's a good point about the apparently superfluous information given in the problem.

If Justice22 hasn't omitted anything from the question, the problem seems to be in that familiar category of "You must figure out which of the given data is relevant to the solution, and which is extraneous."

In hindsight, though, I should have mentioned this in my first response, to avoid leaving Justice22 with the same question about the "other" information. I appreciate your pointing it out.

On the other hand, Justice22, if there's more to the question than what you originally posted, such that the extraneous info might be relevant, let us know.

Quote:

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Originally Posted by ArcSine

If Justice22 hasn't omitted anything from the question, the problem seems to be in that familiar category of "You must figure out which of the given data is relevant to the solution, and which is extraneous."

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This is quite commonly the case, and when I read it, I just assumed was probably true. They not only want you to know what you need, but also what you don't need.