Question

David just finished compiling his firm’s retained earnings statement for the month ended May 31. What should he do with the figure he calculates at the bottom of this statement? A : He should include this amount in his calculation of revenues on the firm’s income statement. B : He should include this amount in his calculation of assets on the firm’s balance sheet. C : He should include this amount in his calculation of expenses on the firm’s income statement. D : He should include this amount in his calculation of stockholders’ equity on the firm’s balance sheet.

Answer 1

Answer:

D : He should include this amount in his calculation of stockholders’ equity on the firm’s balance sheet.

Explanation:

The bottom line will be the balance of retained eaning at year-end. The retained earnings represent the total earnings accumulated over the years whic are in the company and are not distributed to the stockholder as dividends.

This will be placed on the equity section below common stock in order to calculate the total equity of the firm.