Powder Corporation began operations on January 2, 2013, with a total investment of $150,000 by its stockholders.
Net income for its first year of business was $90,000. During 2014 and 2015, net income increased to $188,000 and to $217,000, respectively. Powder paid $85,000 in dividends to its shareholders in each of the three years.
A. In good form, prepare a statement of retained earnings for the year ended December 31, 2014.
B. How much is total retained earnings on December 31, 2015?
C. Explain the link between the statement of retained earnings and the balance sheet.