Financial Reporting of Net Earnings and Retained Earnings

question 60

Essay

Financial reporting of net earnings and retained earnings
The 2012 annual report of Kirtland Products disclosed net earnings of approximately $87 million for the fiscal year ending March 31, 2012, and retained earnings of approximately $485 million as of March 31, 2012.
(a) Which financial statement shows computation of the net earnings?
(b) Which financial statement includes the retained earnings figure of $485 million?
(c) Explain why Kirtland reports $87 million as net earnings, but a much larger amount, $485 million, as retained earnings.

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Definitions:

Lemons

Beyond its botanical context, refers to goods of subpar quality, particularly used in the context of the used-car market to describe vehicles with defects.

Potential Buyers

Individuals or entities that have shown interest or possess the capability to purchase goods or services.

Lemons

In economics, a term used to describe a product of significantly lower quality than what was expected, particularly in the context of used vehicles.

Potential Buyers

Individuals or entities that show interest in purchasing a product or service but have not yet made the decision to buy.