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Office Depot had common stock of $6,800 and retained earnings of$5,000 at the beginning of...

Office Depot had common stock of $6,800 and retained earnings of $5,000 at the beginning of the year. At the end of the year, the common stock balance is $7,100 and the retained earnings account balance is $5,500. The net income for the year is $980. What is the retention ratio?

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Expert Solution

Net income for the year = $980

Addition to retained earnings for the year = Closing balance of retained earnings - Opening balance of retained earnings

Addition to retained earnings for the year = $5500 - $5000

Addition to retained earnings for the year = $500

Retention ratio for the year = Addition to retained earnings for the year/Net income for the year

Retention ratio for the year = $500/$980

Retention ratio for the year = 51.02%

jeff jeffy answered 2 years ago
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