# 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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