Financial Accounting
Financial Accounting
3rd Edition
ISBN: 9780078025549
Author: J. David Spiceland, Wayne M Thomas, Don Herrmann
Publisher: McGraw-Hill Education
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Chapter 3, Problem 3.15E
To determine

To calculate: The balance of retained earnings each year for the given companies.

Expert Solution & Answer
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Answer to Problem 3.15E

The balance of retained earnings each year for the given companies is as follows:

($ in millions)
Year Company V Company R
Net income (loss) Retained earnings Net income (loss) Retained earnings
2006 0 $0 $35 $11
2007 $30 30 -43 -32
2008 -7 23 63 31
2009 41 64 63 94
2010 135 199 102 196
2011 30 229 135 331
2012 -131 98 -42 289
2013 577 675 74 363
2014 359 1,034 110 473
2015 360 1,394 162 635

Table (1)

Explanation of Solution

Retained earnings:

Retained earnings are the portion of earnings kept by the business for the purpose of reinvestments, payment of debts, or for future growth.

Working note:

1. Calculate the retained earnings Company V.

Year 2007:

Opening retained earnings = $0

Net income = $30 million

Dividends = $0

Ending retained earnings=(Beginning retained earnings + Net income – Dividends)=$0 +$30million$0=$30million

(1)

Year 2008:

Opening retained earnings = $30 million

Net loss = $7 million

Dividends = $0

Ending retained earnings=(Beginning retained earnings – Net loss – Dividends)= $30 million $7million$0=$23million

(2)

Year 2009:

Opening retained earnings = $23 million

Net income = $41 million

Dividends = $0

Ending retained earnings = (Beginning retained earnings + Net income – Dividends)= $23 million +$41million$0=$64million

(3)

Year 2010:

Opening retained earnings = $64 million

Net income = $135 million

Dividends = $0

Ending retained earnings = (Beginning retained earnings + Net income – Dividends)= $64 million +$135million$0=$199million

(4)

Year 2011:

Opening retained earnings = $199 million

Net income = $30 million

Dividends = $0

Ending retained earnings = (Beginning retained earnings + Net income – Dividends)= $199 million +$30million$0=$229million

(5)

Year 2012:

Opening retained earnings = $229 million

Net loss = $131 million

Dividends = $0

Ending retained earnings = (Beginning retained earnings – Net loss – Dividends)= $229 million $131million$0=$98million

(6)

Year 2013:

Opening retained earnings = $98 million

Net income = $577 million

Dividends = $0

Ending retained earnings = (Beginning retained earnings + Net income – Dividends)= $98 million +$577million$0=$675million

(7)

Year 2014:

Opening retained earnings = $675 million

Net income = $359 million

Dividends = $0

Ending retained earnings = (Beginning retained earnings + Net income – Dividends)= $675 million +$359million$0=$1,034million

(8)

Year 2015:

Opening retained earnings = $1,034 million

Net income = $360 million

Dividends = $0

Ending retained earnings = (Beginning retained earnings + Net income – Dividends)= $1,034 million +$360million$0=$1,394million

(9)

2. Calculate the retained earnings Company R.

Year 2007:

Opening retained earnings = $11 million

Net loss = $43 million

Dividends = $0

Ending retained earnings = (Beginning retained earnings – Net loss – Dividends)= $11 million $43million$0=$(32million)

(10)

Year 2008:

Opening retained earnings = $(32 million)

Net income = $63 million

Dividends = $0

Ending retained earnings = (Beginning retained earnings + Net income – Dividends)= $(32 million ) +$63million$0=$31million

(11)

Year 2009:

Opening retained earnings = $31 million

Net income = $63 million

Dividends = $0

Ending retained earnings = (Beginning retained earnings + Net income – Dividends)= $31 million +$63million$0=$94million

(12)

Year 2010:

Opening retained earnings = $94 million

Net income = $102 million

Dividends = $0

Ending retained earnings = (Beginning retained earnings + Net income – Dividends)= $94 million +$102million$0=$196million

(13)

Year 2011:

Opening retained earnings = $196 million

Net income = $135 million

Dividends = $0

Ending retained earnings = (Beginning retained earnings + Net income – Dividends)= $196 million +$135million$0=$331million

(14)

Year 2012:

Opening retained earnings = $331 million

Net loss = $42 million

Dividends = $0

Ending retained earnings = (Beginning retained earnings – Net loss – Dividends)= $331 million $42million$0=$289million

(15)

Year 2013:

Opening retained earnings = $289 million

Net income = $74 million

Dividends = $0

Ending retained earnings = (Beginning retained earnings + Net income – Dividends)= $289 million +$74million$0=$363million

(16)

Year 2014:

Opening retained earnings = $363 million

Net income = $110 million

Dividends = $0

Ending retained earnings = (Beginning retained earnings + Net income – Dividends)= $363 million +$110million$0=$473million

(17)

Year 2015:

Opening retained earnings = $473 million

Net income = $162 million

Dividends = $0

Ending retained earnings = (Beginning retained earnings + Net income – Dividends)= $473 million +$162million$0=$635million

(18)

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Chapter 3 Solutions

Financial Accounting

Ch. 3 - 11.Provide an example of a prepaid expense. The...Ch. 3 - Provide an example of a deferred revenue. The...Ch. 3 - 13.Provide an example of an accrued expense. The...Ch. 3 - Provide an example of an accrued revenue. The...Ch. 3 - Sequoya Printing purchases office supplies for 75...Ch. 3 - Jackson Rental receives its September utility bill...Ch. 3 - 17.Global Printing publishes several types of...Ch. 3 - At the end of May, Robertson Corporation has...Ch. 3 - Prob. 19RQCh. 3 - Prob. 20RQCh. 3 - Prob. 21RQCh. 3 - Prob. 22RQCh. 3 - Prob. 23RQCh. 3 - Prob. 24RQCh. 3 - Describe the debits and credits for the three...Ch. 3 - In its first four years of operations, Chance...Ch. 3 - Prob. 27RQCh. 3 - Prob. 28RQCh. 3 - Determine revenues to be recognized (LO31) Below...Ch. 3 - Prob. 3.2BECh. 3 - Prob. 3.3BECh. 3 - Analyze the impact of transactions on the balance...Ch. 3 - Prob. 3.5BECh. 3 - At the beginning of May, Golden Gopher Company...Ch. 3 - Record the adjusting entry for prepaid rent (LO33)...Ch. 3 - Prob. 3.8BECh. 3 - Prob. 3.9BECh. 3 - Prob. 3.10BECh. 3 - Prob. 3.11BECh. 3 - Prob. 3.12BECh. 3 - Prob. 3.13BECh. 3 - Prob. 3.14BECh. 3 - Prob. 3.15BECh. 3 - Prob. 3.16BECh. 3 - Prob. 3.17BECh. 3 - Prob. 3.18BECh. 3 - Prob. 3.19BECh. 3 - Prob. 3.20BECh. 3 - Consider the following situations: 1.American...Ch. 3 - Consider the following situations: 1.American...Ch. 3 - Refer to the situations discussed in E31....Ch. 3 - Differentiate cash-basis expenses from...Ch. 3 - Prob. 3.5ECh. 3 - Listed below are all the steps in the accounting...Ch. 3 - Prob. 3.7ECh. 3 - Prob. 3.8ECh. 3 - Prob. 3.9ECh. 3 - Prob. 3.10ECh. 3 - Prob. 3.11ECh. 3 - Prob. 3.12ECh. 3 - Prob. 3.13ECh. 3 - Prob. 3.14ECh. 3 - Prob. 3.15ECh. 3 - Prob. 3.16ECh. 3 - Prob. 3.17ECh. 3 - Prob. 3.18ECh. 3 - Prob. 3.19ECh. 3 - Prob. 3.20ECh. 3 - Consider the following transactions. Required: For...Ch. 3 - Prob. 3.2APCh. 3 - Prob. 3.3APCh. 3 - Prob. 3.4APCh. 3 - Prob. 3.5APCh. 3 - The year-end financial statements of Rattlers Tax...Ch. 3 - Prob. 3.7APCh. 3 - Prob. 3.8APCh. 3 - Consider the following transactions. Required: For...Ch. 3 - Prob. 3.2BPCh. 3 - Prob. 3.3BPCh. 3 - Prob. 3.4BPCh. 3 - Prob. 3.5BPCh. 3 - FIGHTING ILLINI Income Statement Service revenue...Ch. 3 - Prob. 3.7BPCh. 3 - Prob. 3.8BPCh. 3 - Prob. 3.1APCPCh. 3 - Prob. 3.2APFACh. 3 - Prob. 3.3APFACh. 3 - Prob. 3.4APCACh. 3 - Prob. 3.5APECh. 3 - Prob. 3.7APWC
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