[p 505-510, plus course orientation material]

Retained earnings is one of the major components of shareholders equity. As first discussed in Chapter 3, we compute ending retained earnings as follows:

Beginning retained earnings (at end of previous year)

+ Net income (add this year's net income)

- Dividends declared (subtract any dividends declared this year)

= Ending retained earnings

This year's ending retained earnings is shown as part of Equty on the balance sheet, and becomes next year's beginning retained earnings.

On January 1, 2016 Coco Company had a beginning balance in retained earnings of $43,000. For the year ending December 31, 2016 it had net income of $6,000. On December 30, 2016 Coco Company declared a cash dividend of $5,625 to its stockholders. The ending balance in retained earnings for the year 2016 equals:

A. 11,375

B. (11,375)

C. 43,375

D. 31,375