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How do you compute the retained earnings for Edgemont Corporation?

During 2006, Edgemont Corporation had revenues of $230,000 and expenses, including income taxes, of $190,000. On December 31, 2005, Edgemont had assets of $350,000, Liabilities of $80,000, and Capital Stock of $210,000. Edgemont paid a cash dividend of $25,000 in 2006. No additional Stock was issued. Compute the retained earnings on December 31, 2005 and 2006.

Solution Summary

This solution provides the calculations for net income and retained earnings.