Beginning retained earnings net change in retained

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Beginning retained earnings + Net change in retained earnings = Ending retained earnings Solve for beginning retained earnings: Beginning retained earnings = Ending retained earnings - Net change in retained earnings = $70,100 - $12,900 = $57,200 Solving for net income The basic equation for determining the net change in retained earnings is: Net change in retained earnings = Net income - Dividends Solve for net income: Net income = Dividends + Net change in retained earnings = $11,800 + $4,700 = $16,500 Solving for ending retained earnings The basic equation for ending retained earnings is: Beginning retained earnings + Net change in retained earnings = Ending retained earnings
Solve for ending retained earnings: Ending retained earnings = Beginning retained earnings + Net change in retained earnings = $27,200 + $4,700 = $31,900 Creating a basic income statement
Changes to stockholders' equity: Problem type 2
This problem is designed to examine the relationship between the balance sheet  accounts (assets, liabilities, and permanent  stockholders' equity  accounts--capital stock and retained earnings), the income statement accounts (revenues and  expenses), and, finally, the Dividends account. There are two steps involved in solving this problem: Step 1:  Calculate the following: beginning stockholders' equity, ending  stockholders' equity, and the amount of change (increase or decrease) in  stockholders' equity. (a)  Calculate the beginning stockholders' equity:
(b)  Calculate the ending stockholders' equity:
(c)  Calculate the change (increase or decrease) in stockholders' equity:
Change in stockholders'  equity = Ending stockholders' equity - Beginning stockholders'  equity = $32,000 - $23,000 = $9,000 Since the result is positive, the change in stockholders' equity is an increase.  Next, determine why stockholders' equity increased by $9,000. Since  stockholders' equity is affected by  issuance of stock , revenues, expenses, and  dividends, we must determine which item caused the change in stockholders'  equity. Step 2:  Calculate what caused stockholders' equity to increase by $9,000. The  following equation may be used to determine why stockholders' equity increased. Increase in stockholders' equity =Issuance of stock + Revenues - Expenses -  Dividends To solve for Issuance of stock, modify the equation as follows. Issuance of stock =Increase in stockholders' equity - Revenues + Expenses +  Dividends =$9,000 - $12,200 + $6,000 + $3,900. =$6,700

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