Assuming that reader direct generates net income of $3,000 and pays dividends of $2,000 in 2021, what would be the ending retained earnings balance at december 31, 2021?

Sagot :

The ending retained earnings as at December 31, 2021 is $1,000.

What is the ending retained earnings?

Retained earnings is the cumulative portion of the profit of a company that is not distributed to shareholders as dividends. Retained earnings increase the value of a firm. Net income increases retained earnings. Losses and dividend payment reduces retained earnings.

Retained earnings can be used for working capital and capital expenditures or it can be used to pay off debt obligations of the company. Retained earnings is the link between the income statement and the balance sheet. Retained earnings is recorded in he shareholder's equity section.

If a company does not believe it can use its retained earnings efficiently to generate profits, the retained earnings should be distributed to shareholders as dividends.

Ending retained earnings is net income less dividends.

Ending retained earnings = net income - dividends

$3000 - $2000 = $1000

To learn more about retained earnings, please check: brainly.com/question/14529006

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