Corporations: Paid-in Capital, Retained Earnings, Dividends, and Treasury Stock
Statement of retained earnings
A statement of retained earnings is a formal statement showing the items causing changes in unappropriated and appropriated retained earnings during a stated period of time. Changes in unappropriated retained earnings usually consist of the addition of net income (or deduction of net loss) and the deduction of dividends and appropriations. Changes in appropriated retained earnings consist of increases or decreases in appropriations.
Note Ward Corporation's statement of retained earnings in Exhibit 25. The only new appropriation during 2010 was an additional USD 35,000 for plant expansion. Ward added this new USD 35,000 to the USD 25,000 beginning balance in that account and subtracted that amount from unappropriated retained earnings. An alternative to the statement of retained earnings is the statement of stockholders' equity.
Ward Corporation
Statement of Retained Earnings
For Year Ended 2010 December 31
| Unappropriated retained earnings: | $180,000 | |
| 2010 January 1, balance | 80,000 | |
| Add: Net income | $260,000 | |
| Less: Dividends | $15,000 | |
| Appropriation for plant expansion | 35,000 | 50,000 |
| Unappropriated retained earnings, 2010 December 31 | $210,000.00 | |
| Appropriated retained earnings: | ||
| Appropriation for plant expansion, 2010 January 1, balance | $25,000.00 | |
| Add: Increase in 2010 | 35,000 | $ 60,000 |
| Appropriation for contract obligation, 2010 January 1, balance | 20,000 | |
| Appropriated retained earnings, 2010 December 31 | $80,000 | |
| Total retained earnings, 2010 December 31 | $290,000 |
Exhibit 25: Statement of retained earnings