Which of the following events will cause retained earnings to increase?

  1. Dividends declared by the board of directors.
  2. Net income reported for the period.
  3. Issuance of stock in exchange for cash.
  4. Net loss reported for the period.

Answer b. Net income reported for the period

Explanation: Income, also known as gross sales, influences retained earnings since any surge in income through sales and investments, supports profits or net gain. Because of higher overall gain, more cash is designated to retained earnings after any cash spent on liabilities.

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