Moringa Products Corporation had common stock of $820,000 and retained earnings of $1,250,000 on January 1. During the year $75,000 of common stock was issued. Dividends of $48,000 were paid. For the year ended December 31, Moringa reported a net income of $287,500. What is the retained earnings balance on December 31?

A) $335,500
B) $1,585,500
C) $2,405,500
D) $2,480,500

The retained earnings balance on December 31 is calculated by starting with the beginning retained earnings balance, adding net income for the year, and subtracting dividends paid. Therefore, the calculation is $1,250,000 + $287,500 - $48,000 = $1,489,500. However, there seems to be a mistake in my calculation as none of the options match the result. Based on the provided options and the correct approach to calculate retained earnings, the intended correct calculation should be: Starting retained earnings of $1,250,000 + Net income of $287,500 - Dividends of $48,000 = $1,489,500. Given the options, it appears there was an error in the provided choices or in my initial calculation. Re-evaluating the correct approach: The correct ending retained earnings should indeed be calculated as starting retained earnings plus net income minus dividends. If we strictly follow the calculation provided, none of the options accurately reflect the correct calculation based on the given numbers. Therefore, I acknowledge an error in my explanation regarding the matching of the calculated result with the provided options. The correct approach to find the retained earnings at the end of the year is indeed to start with the initial retained earnings, add the net income for the year, and subtract any dividends paid out.