Question

In: Finance

On 12/31/2020, Heaton Industries Inc. reported retained earnings of $275,000 on its balance sheet, and it...

On 12/31/2020, Heaton Industries Inc. reported retained earnings of $275,000 on its balance sheet, and it reported that it had $172,500 of net income during the year. On its previous balance sheet, at 12/31/2019, the company had reported $555,000 of retained earnings. No shares were repurchased during 2020. How much in dividends did Heaton pay during 2020?

elect the correct answer.

a. $452,571
b. $452,786
c. $452,714
d. $452,643
e. $452,500

Solutions

Expert Solution

How much in dividends did Heaton pay during 2020?

Answer: $452,500

Explanation:

Data provided in the question

Last year balance of retained earrings = $555,000

Retained earnings reported for the current year in balance sheet = $275,000

Current year Net Income = $172,500

                If dividends were not paid then the balance of retained earnings would have been = $727,500 (i.e. Last year retained earnings balance of $555,000 + Net income of current year $172,500) but current year balance is only $275,000, that means company paid dividend of $452,500/-

(I.e. $555,000 + $172,500 - $275,000 = $452,500 (dividend paid)

Alternatively

Particular

Amount

Last year balance of retained earrings

$555,000

Add : Current year Net Income

$172,500

Less : Dividend paid

-$452,500

Balance retained earnings

$275,000


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