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20 September, 06:31

Henson Company began the year with retained earnings of $330,000. During the year, the company recorded revenues of $500,000, expenses of $380,000, and paid dividends of $40,000. What was Henson's retained earnings at the end of the year?

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  1. 20 September, 07:36
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    Henson's retained earnings at the end of the year was $410,000

    Explanation:

    Ending balance in retained earnings is calculated by using following formula:

    Ending balance in retained earnings = Beginning balance in retained earnings + Net income - Cash dividends - Stock dividends

    Henson Company began the year with retained earnings of $330,000.

    The company paid dividends of $40,000

    Henson's Net income = Revenues - Expenses = $500,000 - $380,000 = $120,000

    Ending balance in retained earnings = $330,000 + $120,000 - $40,000 = $410,000
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