Question

For the past five years, Mookie Consulting Services reported the following annual net income and dividend amounts:
Year Net Income Dividends
1 $ 22,000 $ 2,000
2 17,000 2,000
3 9,000 1,000
4 14,000 3,000
5 25,000 4,000
If Mookie had Retained Earnings of $88,000 at the end of year 5, what was the company's Retained Earnings at the beginning of Year 1?

Answer 1

Answer:

$13,000

Explanation:

Net income = retained earning Plus the dividends declared.

i.e., net income = retained earning + dividends.

Therefore, retained earning = net come - dividends.

To get retained earning at the end of year one:

Total net income

= 22,000 + 17,000, +9000, + 14,000, +25,000

=$87,000

Total dividends

=2000+2000+1000+3000+4000

=$12,000

retained earnings at year five

=$88,000

Beginning retained earnings = ending retained earnings − total net income + total dividends

=($88,000-87,000)=12,000

=$1000+12,000

=$13,000