what is the estimated balance in retained earnings at the end of the coming year?

A firm had year end retained earnings of $64,100,000. It forecasts net income for thecoming year to be $9,400,000. If it plans to pay out 40% of its net income as dividends, what is theestimated balance in retained earnings at the end of the coming year?

Expert Solution

estimated balance in retained earnings at the end of the coming year = $69,740,000

Working :

Retained earnings will be increased by net income.

Net income for the year before dividend = $9,400,000

Less: Dividend @40% [9,400,000x 40%] - 3,760,000

Net income to be added to retained earnings = $5,640,000

Beginning retained earningsbalance	64,100,000
Add : Retained earnings	5,640,000
Ending retained earnings	69,740,000

estimated balance in retained earnings at the end of the coming year = $69,740,000

Ramesh R answered 3 years ago

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