On December 10, 2014, Jennings, Inc. paid out total dividends of $450,000 (this was the only dividend
payment made during the year). If Jennings reported Retained earnings of $2,186,000 for 2013 and Retained
earnings of $2,380,000 for 2014, what was Jennings reported net income in 2014?
To determine the reported net income for Jennings in 2014, we need to consider the changes in retained earnings.
Retained earnings is calculated as follows:
Retained Earnings (end of the year) = Retained Earnings (beginning of the year) + Net Income - Dividends
We are given the following information:
Retained Earnings 2013 = $2,186,000
Retained Earnings 2014 = $2,380,000
Dividends paid in 2014 = $450,000
Using the formula, we can calculate the net income for 2014:
$2,380,000 (Retained Earnings 2014) = $2,186,000 (Retained Earnings 2013) + Net Income - $450,000 (Dividends)
Rearranging the equation to solve for Net Income, we get:
Net Income = $2,380,000 - $2,186,000 + $450,000
Calculating this, the net income for Jennings in 2014 is:
Net Income = $644,000