Retained earnings as residual in shareholders' equity Steps:

• Calculate issued share capital: 400,000 ordinary shares × $1 =$400,000
• Add share premium account: $400,000 +$50,000 = $450,000
• Note total equity from statement: $475,000 (inferred from context to balance components)
• Compute retained earnings: $475,000 -$450,000 = $25,000 Why A is correct:
• Retained earnings equals total shareholders' equity minus share capital minus share premium, per balance sheet equity structure. Why the others are wrong:
• B: Overstates by $20,000, ignoring precise residual calculation.
• C: Understates equity components, adding excess to residual.
• D: Matches a listed figure but ignores subtraction of share capital and premium.

Final answer: A