Question

In: Finance

Ivan's, Inc., paid $478 in dividends and $584 in interest this past year. Common stock increased...

Ivan's, Inc., paid $478 in dividends and $584 in interest this past year. Common stock increased by $194 and retained earnings decreased by $120. What is the net income for the year?

Solutions

Expert Solution

Net Income $ 358

Working:

Dividend paid $        478
Less:Decrease in retained earning $        120
Net Income for the year $        358
Alternatively,
Suppose Net Income "x" and beginning retained earning "y"
Beginning Retained Earning y
Add:Net Income x
Less:Dividend 478
Ending retained Earning y+x-478
Further,
retained earning decreased by $ 120
so,
Beginning retained earning-Ending Retained earning = 120
or,
y-(y+x-478) = 120
or,
y-y-x+478 = 120
or,
-x+478 = 120
or,
-x = 120-478
or,
-x = -358
or,
x = $        358

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