A company began the year with retained earnings of $1,000. Net income for the year was $250, it repaid $350 of its line of credit balance, and it paid dividends to its shareholders of $200. What was the company’s retained earnings at the end of the year?
To find the company's retained earnings at the end of the year, we need to take into account the initial retained earnings, net income, repayment of line of credit, and dividends paid.
Retained Earnings at the beginning of the year = $1,000
Net Income for the year = $250
Repayment of Line of Credit = $350
Dividends Paid = $200
To calculate the retained earnings at the end of the year, follow these steps:
Step 1: Add the net income to the beginning retained earnings:
Retained Earnings = $1,000 + $250 = $1,250
Step 2: Subtract the repayment of the line of credit:
Retained Earnings = $1,250 - $350 = $900
Step 3: Subtract the dividends paid:
Retained Earnings = $900 - $200 = $700
Therefore, the company's retained earnings at the end of the year is $700.