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:

Shares Outstanding

The total number of shares of a corporation's stock that are currently owned by all its shareholders, including share blocks held by institutional investors and restricted shares owned by the company’s officers and insiders.

Par Value

A nominal value assigned to a share of stock in the charter of a corporation, which is the minimum legal capital per share.

Common Share

A unit of equity ownership in a corporation, granting holders voting rights and a share in the profits through dividends.

Noncumulative

A term often used in the context of preferred stock dividends that indicates dividends not paid in one period do not need to be paid in future periods.