Question

Zoe Backus owns and operates Backus Advertising Services. On January 1, 2018, Retained Earnings had a balance of $266,300. During the year, Zoe invested an additional $58,600 in exchange for common stock and $34,600 in dividends were paid. For the year ended December 31, 2018, Backus Advertising Services reported a net income of $29,100. Prepare a retained earnings statement for the year ended December 31, 2018. Backus Advertising Services Retained Earnings Statement For the Year Ended December 31, 2018 Retained earnings, January 1, 2018 $266,300 Net income $ 29,100 Dividends 34,600 ✓a Change in retained earnings Retained earnings, December 31, 2018 $ 260,800 Feedback Check My Work The first item normally on the statement of retained earnings is the beginning balance of the retained earnings account. This balance will be changed positively by any net income, and negatively by any net losses and dividends. Learning Objective 2.

Answer 1

The amount of change in retained earnings should be $5500 in negative numbers....Write it as $- 5,500.

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The amount of change in retained earnings = $ 29,100 - $ 34,600= $-5,500.

The retained earnings is increased by net income and it decreases with dividends. The net income in above case is less than dividends so the change is retained earnings is basically a decrease of overall retained earnings balance by $5,500.