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24 March, 12:27

A company's retained earnings at the beginning of the year is $1 million. It paid $100,000 in dividends, had $250,000 in net income, and its goodwill increased by $10,000. What is its retained earnings as of the end of the year?

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  1. 24 March, 12:39
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    Answer: $1,160,000

    Explanation:

    Given:

    Retained earnings (beginning) = $1 million

    Dividend paid = $100,000

    Net income = $250,000

    Goodwill increased by = $10,000

    Therefore, we'll compute Retained earnings (end of the year) as:

    Retained earnings (end of the year) = Retained earnings (beginning) + Net income + Increase in Goodwill - Dividend paid

    Retained earnings (end of the year) = $1,000,000 + $250,000 + $10,000 - $100,000

    Retained earnings (end of the year) = $1,160,000
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