Thelma and Louie, Inc., started the year with a balance of retained earnings of

Question

Thelma and Louie, Inc., started the year with a balance of retained earnings of $544 million and ended the year with retained earnings of $588 million. The company paid dividends of $34 million to the preferred stockholders and $74 million to common stockholders.

Thelma and Louie, Inc., started the year with a balance of retained earnings of $544 million and ended the year with retained earnings of $588 million. The company paid dividends of $34 million to the preferred stockholders and $74 million to common stockholders.

Explanation / Answer

Retained Earnings is the portion of net earnings which are not paid as dividend but retained for reinvestment in the business or for payment of debt.

We know that,

Ending Retained Earnings

= (Beginning Retained Earnings) + (Income during the Period)

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