# R20 - Retains earning calculation - Multinantional Operations Scheweser notes / video

Hi all,

I am studing with Schwerser and following the video lectures, which I think they are quite useful.

In the Video of the reading 20, around the 45 min; our instructor explain how we have to translate the Retain Earnings with an example. In it, he said because the initial and final retain earnings is given in the statement along with the NI figure, the difference SHOULD BE DIVIDENDS (even if there is no information about them on the question statement).

Well, in the Schwerser notes, R20 question 15; I applied that principle, and because initial and final RE is given, and NI is calculated in the previous step I assume the difference between the RE2016 given (1200 x 0.4 = \$480) and the calculated (NI (\$171,68) + RE-beginning (\$383,3) =\$555) is the dividends (\$74,98).

Continuing my calculation I arrived to the cumulative CTA was \$40.

I had a big surprise when I saw the solution of the question, basically we have to re-calculate the ending retain earnings (\$555) and ignore the one which is in the BS (\$480)… that is a contradiction of what is explained in the video lecture!

Is there an erratum on the exercise or am I missing something?

Thanks

S

Assets : 3340*0.40 = 1340

Liab : 1750*0.4 = 700

Common stock : 400*0.5(hist rate) = 200

Retained earnings as calculated by you =555

so, 1340-700-200-555 = -115

I hope in absence of any information with regards to divdends, we assume they didn’t occured that particular year and hence consider them 0.

Thank you,

I think you are missing the point of my question. In the video lecture, the instructor says if the Retained earings (end) are given the difference we should treat it as a dividend, even if nothing is specefied in the statement.

If not, why do they give you the retairned earings (end)?