On January 1, James Incorporated had a retained earnings balance of $158,000. During the year, James reported net income of $226,000 and paid cash dividends of $70,000. Calculate the retained earnings balance at its December 31 year-end.

To calculate the retained earnings balance at the year-end (December 31), we can use the following formula:

\[
\text{Ending Retained Earnings} = \text{Beginning Retained Earnings} + \text{Net Income} - \text{Dividends Paid}
\]

Given:
- Beginning Retained Earnings = $158,000
- Net Income = $226,000
- Dividends Paid = $70,000

Now, let's plug in the values:

\[
\text{Ending Retained Earnings} = 158,000 + 226,000 - 70,000
\]

\[
\text{Ending Retained Earnings} = 384,000 - 70,000 = 314,000
\]

So, the retained earnings balance at December 31 is **$314,000**.

Would you like more details on how this calculation works? Here are a few related questions you might find useful:

1. What factors affect the retained earnings balance?
2. How are retained earnings different from net income?
3. Can a company have negative retained earnings, and what does that imply?
4. How are dividends decided and how do they impact retained earnings?
5. What is the importance of retained earnings for a company’s financial health?

**Tip:** Retained earnings represent the cumulative profit kept by the company over time, and are often used for reinvestment into the business or to pay down debt.

Learn how to calculate the retained earnings balance for James Incorporated at year-end with this detailed example. Starting with a beginning balance of $158,000, the company reported a net income of $226,000 and paid $70,000 in dividends. Suitable for students and professionals in accounting or finance.

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