Sparks Co.\'s January 1, 20x1, retained earnings account balance was $710047. Th

Question

Sparks Co.'s January 1, 20x1, retained earnings account balance was $710047. The company's net income for the year ended December 31,20x1, was $349214 and its December 31,20x1, retained earnings account balance was $802618. Assuming all of the difference is a cash flow, which of the following amounts would appear in the "cash flow from financing activities" section of the statement of cash flows with respect to activity in the retained earnings account during the year? Positive numbers represent a cash inflow; negative numbers represent a cash outflow.

Explanation / Answer

Retained earnings as on Dec 31, 20x1                    =$802,618

Less: Net income                                                     = $(349,214)

Less:Retained Earnings as on Jan 01, 20x1           = $(710,047)

Difference in retained earning                                  = $(256,643)

As there is reduction in retained earnings so there will be an outflow of cash.

So, Option B will be selected.

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