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Beginning Retained Earnings is $30,000. Net income for the month is $13,000 and dividends of $3,000 are declared. What is the ending Retained Earnings balance?
A$46,000
B$20,000
C$40,000
D$43,000
Answer & Solution
Correct answer: C. $40,000
1. Start with beginning Retained Earnings of $30,000.
2. Add net income: $30{,}000 + 13{,}000 = 43{,}000$.
3. Subtract dividends: $43{,}000 - 3{,}000 = 40{,}000$.
4. Option A adds dividends instead of subtracting; option D forgets the dividend; option C wrongly subtracts net income.
5. Therefore ending Retained Earnings is $40,000.
_Source: Jonick, Principles of Financial Accounting (CC BY-SA 4.0), §1.7.3 "Retained Earnings Statement", p.44_
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