Ending retained earnings is calculated as:

• A. Beginning retained earnings + Net income - Dividends
• B. Beginning retained earnings - Net income + Dividends
• C. Net income + Dividends - Beginning retained earnings
• D. Total assets - Total liabilities

Answer: (A)

Verified step by step guidance

1. Understand the concept of retained earnings: Retained earnings represent the portion of net income that is retained by the company rather than distributed as dividends. It is calculated by adjusting the beginning retained earnings for net income and dividends.
2. Identify the correct formula for ending retained earnings: The formula is 'Beginning retained earnings + Net income - Dividends'. This formula accounts for the starting balance, adds the income earned during the period, and subtracts the dividends paid out.
3. Analyze the incorrect options: The other options provided in the problem do not align with the standard formula for retained earnings. For example, 'Beginning retained earnings - Net income + Dividends' would incorrectly subtract net income and add dividends, which is not how retained earnings are calculated.
4. Understand why 'Total assets - Total liabilities' is incorrect: This calculation represents equity, not retained earnings. Retained earnings are a component of equity but are not calculated using this formula.
5. Apply the correct formula to solve similar problems: To calculate ending retained earnings, always start with the beginning retained earnings, add net income, and subtract dividends. This ensures the calculation reflects the company's retained profits accurately.