During January 2014, its first month of operation, Osborn Enterprises earned net income of $1,700 and paid dividends to the owners of $500. At January 31, the balance in Retained Earnings will be:
b. $1,700 credit
c. $1,200 credit
d. $500 debit
Retained earnings represent the accumulated net income that is reported in the stockholders' equity. Retained earnings are used as a source of internal financing so that external financing needs are reduced. Retained earnings are used to pay dividends.
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fromChapter 12 / Lesson 2
Learn about the relationship between retained earnings and dividends. Find out the different types of dividends and where distributions are in financial statements.