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On January 1, 2020, Choco Company's balance in retained earnings was $50. During 2020, the company...

On January 1, 2020, Choco Company's balance in retained earnings was $50. During 2020, the company earned a net income of $60 and paid $30 in dividends. Calculate the retained earnings balance on December 31, 2020.

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Answer #1

The retained earnings balance on December 31, 2020 is $80.

Choco Company's
Statement of Retained Earnings
for the year ended December 31, 2020

Retained earnings at January 1, 2020

$50

Net income for the year ended December 31, 2020

$60

Dividends paid to shareholders

-$30

Retained earnings at December 31, 2020

$80

The RE formula is as follows:

RE = Beginning Period RE + Net Income/Loss – Cash Dividends – Stock Dividends

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