[aahuja1]

Using the data below, how do I calculate the retained earnings balance as of December 31,2007

Retained earning dec 31 2008 - $245,200
Net decrease in total assets during '08 - $37,400
Net increase in accounts receivable in '08 - $8,600
Dividends declared and paid in '08 - $33,600
Proceeds from issuance of bonds during '08 - $88,400
Net loss for the year ended Dec 31, 2008 - $23,000

Thanks

[aahuja1]

I am not sure if I am doing this correctly. I think the answer I wrote below couldbe right and I added them altogether as we are trying to find out the balance as of 2007 would be 1 year in the past. Could you check my answer, and if I am wrong, possibly point me in the right direction?

245,200+23,000+33,600 = Retained Earnings as Dec 31 2007
Retained Earnings = 301,800

[Hermansherman]

A loss would be a reduction in retained earnings, not an addition.
Similarly, dividends reduce equity, they do not increase equity

Herman

[santys72]

The answer you have from aahuja1 is correct.

Retained Earnings is affected by the following transactions:

Retained Earnings Beginning of the Period
Less (Plus) previous period accounting errors (Retrospective Approach)
Less (Plus) Changes in accounting principles (retrospective Approach)
Less: Dividends Declared
Plus: Net Income for the period
Less: Loss for the period
Plus: Quasi Reorganizations
retained Earnings at the End of the Period

In this case you have:
begging Balance - ? 301,800 Plug In
Less: Declared Dividends - 33,600
Less: Loss for the period - 23,000
Ending balance - 245,200

Therefore, 245,200 + 33600 + 23000 = 301,800

Plug the number in in the above chart and you will see that you get to the ending balance for 2008.

[tgn]

Hi,

SO, in applying to another "balance sheet"... if I have a retaining at the end of the year as $57,605 with Net Income of $31,386 and a Common Dividends Paid of $12,554. I should do the math reversely to find out the Balance of the Retain Earning at the beginning of the year.

$57,605 - $31,386 + $12,554 = $38,773

Right?
Thanks

[santys72]

Yes, that is correct.

Hope you have it this time