Question

on january 1, payson incorporated had a retained earnings balance of $32,000. during the year, payson reported net income of $31,200 and paid cash dividends of $18,200. calculate the retained earnings balance at its december 31 year - end.

Explanation:

Step1: Recall retained earnings formula

The formula for ending retained earnings is: \( \text{Ending Retained Earnings} = \text{Beginning Retained Earnings} + \text{Net Income} - \text{Dividends} \)

Step2: Substitute the given values

Beginning Retained Earnings = $32,000, Net Income = $31,200, Dividends = $18,200.
So, \( \text{Ending Retained Earnings} = 32000 + 31200 - 18200 \)

Step3: Perform the arithmetic

First, add 32000 and 31200: \( 32000 + 31200 = 63200 \)
Then, subtract 18200 from 63200: \( 63200 - 18200 = 45000 \)

Answer:

$45,000