David's Had a Retained Earnings Balance at the End of Last

question 37

Multiple Choice

David's had a retained earnings balance at the end of last year of $220,000. The firm had $63,000 in earnings this year and $120,000 in capital spending. David's maintains a debt-equity ratio of 2.2 and strictly adheres to a residual dividend policy. What is the retained earnings balance at the end of this year?

• A) $223,000
• B) $245,500
• C) $248,636
• D) $257,500
• E) $274,545

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Definitions:

Listed Public Company

A corporation whose shares are traded on a public stock exchange, allowing for widespread ownership by investors.

Protective Rights

Rights granted to minority shareholders or debt holders to protect their interest, which may include veto powers on major corporate actions.

Capital Expenditure

Funds used by a company to acquire, upgrade, and maintain physical assets such as property, industrial buildings, or equipment.

Lender

An individual, financial institution, or entity that provides funds to another with the expectation that the funds will be repaid with interest.