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STATEMENT OF STOCKHOLDERS' EQUITY In its most recent financial statements, Newhouse Inc. reported $60 million of...

STATEMENT OF STOCKHOLDERS' EQUITY In its most recent financial statements, Newhouse Inc. reported $60 million of net income and $840 million of retained earnings. The previous retained earnings were $790 million. How much in dividends were paid to shareholders during the year? Assume that all dividends declared were actually paid.

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Expert Solution

Given:

Net Income = $ 60 million

Opening retained earnings for recent year = $ 790 million            (this is equal to closing of previous year)

Closing retained earnings for recent year = $ 840 million

Change in retained earnings = Closing – opening retained earnings

                                                   = $ 840 million - $ 790 million

                                                   = $ 50 million

Retained earnings has increased by $ 50 million.

Dividend payment during the year = Net Income – Increase in retained earnings

                                                              = $ 60 million - $ 50 million

                                                               = $ 10 million

Hence, dividends of $ 10 million paid to shareholders during the year.

Concept: Dividend is paid out of net income and rest is transferred to retained earnings. Here, out of net income of $ 60 million, $ 10 million is paid as dividend and $ 50 million goes to retained earnings.

jeff jeffy answered 1 year ago
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