Fernwood Company is preparing the company\'s statement of cash flows for the fis

Question

Fernwood Company is preparing the company's statement of cash flows for the fiscal year just ended. The following information is available: Retained earnings balance at the beginning of the year $ 303,000 Cash dividends declared for the year 67,500 Proceeds from the sale of equipment 115,800 Gain on the sale of equipment 6,600 Cash dividends payable at the beginning of the year 29,700 Cash dividends payable at the end of the year 37,000 Net income for the year 148,500 The ending balance in retained earnings is:

Explanation / Answer

Ending balance in retained earnings = beginning retained earnings balance + net Income - cash dividend declared

= $303000+$148500-$67500

=$384000

Cash dividend declared should be deducted from retained earnings . not matter whether they are paid or not.

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