Aneez Corporation was incorporated on January 1, 2020. At that time, 10,000 shares of common were sold and issued at $10.00 per share cash. $20,000 of the proceeds was used to purchase machinery. Aneez Corporation had promised to pay $2.00 per share in dividends during the year if income exceeded $40,000. Income totaled $60,000 however, due to a cash shortage Aneez Corporation declared a scrip dividend (resulting in a current liability) rather than an immediate cash dividend. If no other transactions occurred which would affect retained earnings, the corporation should report on December 31, 2020 retained earnings of:

Question 1 options:

$20,000

$160,000

$60,000

$40,000