Carmen, Inc. started the year with $100,000 of retained earnings. The company reported $125,000 of net operating income and declared $35,000 of dividends. What is the amount of the company’s ending retained earnings?

The amount of the company’s ending retained earnings is $190,000

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

Carmen, Inc. started the year with $100,000 of retained earnings. The company had  $125,000 of net operating income and declared $35,000 of dividends.

Ending balance in retained earnings = $100,000 + $125,000 - $35,000 = $190,000

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