For the first three years of operations, the company reports net income of $1,000, $2,000, and $3,000, and pays dividends of $500, $1,000, and $1,000. What is the balance of retained earnings at the end of the third year?

balance of retained earnings = $3500

Explanation:

given data

net income year 1 = $1,000

net income year 2 = $2,000

net income year 3 = $3,000

pays dividends year 1 = $500

pays dividends year 2 = $1000

pays dividends year 3 = $1000

solution

we get here balance of retained earnings at end of 3rd year will be as

balance of retained earnings = Beginning Retained Earnings + net income - dividend ... 1

put here value we get

balance of retained earnings = 0 + ($1,000 + $2,000 + $3,000) + ($500 + $1,000 + $1,000)

balance of retained earnings = $3500