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    ajturner32's Avatar
    ajturner32 Posts: 7, Reputation: 1
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    #1

    Sep 29, 2007, 10:52 AM
    retained earnings computation
    Can someone please look at this and let me know if I am correct ?

    During 2006, Edgemont Corporation had revenues of $230,000 and expenses, including income taxes of $190,000. On December 31, 2005, Edgemont had assets of $350,000, liabilities of $80,000 and capital stock of $210,000. Edgemont paid a cash dividend of $25,000 in 2006. No additional stock was issued. Compute the retained earnings on December 31, 2005, and 2006.

    230,000 + 350,000 - 80,000 - 210,000 + 25,000 = $315,000..

    Am I on the right track here?

    Thanks,
    CaptainForest's Avatar
    CaptainForest Posts: 3,645, Reputation: 393
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    #2

    Sep 29, 2007, 12:31 PM
    R/E Dec. 31/05 = 60,000

    Calculation: 350,000 - 80,000 - 250,000

    R/E Dec. 31/06 = 75,000

    Calculation: 60,000 - 25,000 (dividends + 40,000 (net income which is 230K - 190K)
    ajturner32's Avatar
    ajturner32 Posts: 7, Reputation: 1
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    #3

    Sep 29, 2007, 02:13 PM
    Quote Originally Posted by ajturner32
    Can somone please look at this and let me know if I am correct ?

    During 2006, Edgemont Corporation had revenues of $230,000 and expenses, including income taxes of $190,000. On December 31, 2005, Edgemont had assets of $350,000, liabilities of $80,000 and capital stock of $210,000. Edgemont paid a cash dividend of $25,000 in 2006. No additional stock was issued. Compute the retained earnings on December 31, 2005, and 2006.

    230,000 + 350,000 - 80,000 - 210,000 + 25,000 = $315,000..

    Am I on the right track here?

    Thanks,.
    Thank you so much for your reply. I have another question though.. I cannot figure out where you came up w/ the 250,000 and the 60,000
    CaptainForest's Avatar
    CaptainForest Posts: 3,645, Reputation: 393
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    #4

    Sep 29, 2007, 02:58 PM
    It should read 210,000, not 250,000. I hit the wrong key.
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