Lakeview Industries had sales of $40 million and net income of $2 million in 2012. Lakeview paid a dividend of $1.5 million
Assuming that their beginning balance for retained earnings was $4 million, calculate their ending balance for retained earnings.
A) $4.5 million
B) $2.5 million
C) $3 million
D) $4 million
A
Explanation: A) Addition to R/E = NI - Div = $2,000,000 - $1,500,000 = $500,000. Accumulated R/E = Existing R/E + Addition to R/E = $4,000,000 + $500,000 = $4,500,000.
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