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    How do you compute the retained earnings for Edgemont Corporation?

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    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.

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

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