During Its First Five Years of Operations,Della Manufacturing Reports Net

question 100

Essay

During its first five years of operations,Della Manufacturing reports net income and pays dividends as follows.Calculate the balance of retained earnings at the end of each year.Note that retained earnings will always equal $0 at the beginning of year 1.
$$\begin{array} { c c c l } \text { Year } & \begin{array} { c } \text { Net } \\\text { Income }\end{array} & \text { Dividends } & \begin{array} { l } \text { Retained } \\\text { Earnings }\end{array} \\\hline 1 & \$ 1,700 & \$ 1,000 & \\2 & 2,700 & 1,000 & \\3 & 3,200 & 2,000 & \\4 & 5,400 & 2,000 & \\5 & 7,600 & 3,000 & \\-\end{array}$$

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Definitions:

Residual Value

The estimated salvage value of an asset at the end of its useful life.

Double-Declining-Balance

A method of accelerated depreciation where an asset's book value is decreased at double the rate of its straight-line depreciation.

Residual Value

It's the estimated value that an asset will realize upon its sale at the end of its useful life, after depreciation has been taken into account.

Depreciable Cost

The amount of an asset’s cost that will be allocated to depreciation expense over its useful life, determined by the difference between the asset’s initial cost and its residual value.