Wildhorse Company began the year 2025 with retained earnings of $651000. During the year, the company sold additional shares of stock for $1017000, recorded revenues of $649000, expenses of $376000, and paid dividends of $141000. What was Wildhorse's retained earnings balance at the end of 2025?

Question

Wildhorse Company began the year 2025 with retained earnings of $651000. During the year, the company sold additional shares of stock for $1017000, recorded revenues of $649000, expenses of $376000, and paid dividends of $141000. What was Wildhorse's retained earnings balance at the end of 2025?

BlackTom AI · Accepted Answer

We start by isolating the components that affect retained earnings (RE): beginning RE, net income for the year, and dividends paid. Net income is calculated as revenues minus expenses.

Option-by-option analysis:

Option "$1,159,000": This value would imply a much larger increase in retained earnings than the actual numbers permit. If you tried to reach this figure by adding beginning RE (651,000) to revenues (649,000), you would already hit 1,300,000, and then subtracting expenses (376,000) would not align with 1,159,000. In short, this option double-counts or misapplies components that do not belong in RE.

Option "$783,000": This option reflects the correct accounting treatment. Beginning RE of 651,000 plus net income (revenues 649,000 minus expenses 376,000 equals 273,000) gives 924,000. Subtracting dividends paid (141,000) yields 783,000.

Option "$649,000": Selecting this would ignore the effect of expenses and dividends. Simply taking revenues (649,000) as ending RE omits the subtraction of expenses and the deduction of dividends, which are essential to the RETAINED earnings calculation.

Option "$1,065,000": This amount could arise if you added beginning RE to net income but forgot to subtract dividends (651,000 + 273,000 = 924,000; adding the dividend impact incorrectly could push toward 1,065,000 only if misapplied elsewhere). The correct sequence does not support reaching 1,065,000 with the given figures.

In summary, the correct approach is to adjust retained earnings for net income and subtract dividends, while ignoring the stock issuance in the RE calculation. The only option that matches 651,000 + (649,000 − 376,000) − 141,000 is 783,000.

Wildhorse Company began the year 2025 with retained earnings of $651000. During the year, the company sold additional shares of stock for $1017000, recorded revenues of $649000, expenses of $376000, and paid dividends of $141000. What was Wildhorse's retained earnings balance at the end of 2025?

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