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    lindsay867's Avatar
    lindsay867 Posts: 4, Reputation: 1
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    #1

    Mar 17, 2010, 10:04 AM
    Retained earnings
    I need to calculate the retained earnings balance as of December 31, 2008.

    Retained earnings, Dec 31, 2009.. . $841,200
    Decrease in total liabilities during 2009... 183,200
    Gain on the sale of buildings during 2009... 64,400
    Dividends declared and paid in 2009... 18,000
    Proceeds from sale of common stock in 2009... 197,600
    Net income for the year ended Dec 31, 2009... 90,400

    I would appreciate any help with this, thanks!
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    lindsay867 Posts: 4, Reputation: 1
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    #2

    Mar 17, 2010, 01:56 PM

    I got an answer of 690,000. Does anyone agree with this?
    morgaine300's Avatar
    morgaine300 Posts: 6,561, Reputation: 276
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    #3

    Mar 17, 2010, 03:05 PM

    No I don't agree with it. It's more useful if you show where you get your answers from so that we can see where you've gone wrong.

    The only things that affect retained earnings are net income and dividends. You have end-of-year and you have to work backwards.
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    lindsay867 Posts: 4, Reputation: 1
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    #4

    Mar 17, 2010, 04:22 PM

    So net income- dividends = 72400. So 841200 - 72400 = 768800 retained earnings for 2008?
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    morgaine300 Posts: 6,561, Reputation: 276
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    #5

    Mar 19, 2010, 12:07 AM

    Correct. :-)
    doi's Avatar
    doi Posts: 3, Reputation: 1
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    #6

    Mar 19, 2010, 02:08 AM

    768,800.. the correct formula is:

    Retained earnings, end + Dividends declared and paid - net income, end... dividends are separated from income statement accounts.
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    morgaine300 Posts: 6,561, Reputation: 276
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    #7

    Mar 19, 2010, 02:23 AM

    There is no "correct formula." If you think there is, you're too stuck in some textbook. What she did worked just as well and got her to the right answer. It's just a calculation, not an income statement, and she did it by using the "net change in retained earnings." Something wrong with that?
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