In: Finance
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.
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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 |