Question

If there was no beginning retained earnings, net income of $30,300, and ending retained earnings of $8,000, how much were dividends?

Answer 1

$22,300

Step-by-step explanation:

Assuming that the net income that is stated here was after the payment of all debt obligations (e interest payment and preference share dividends) then this is all income that belongs to shareholders. This income can either be distributed as dividends or retained in the business for future projects and would increase the value of equity in the balance sheet.

Out of the $30,300 net income, if only $8,000 was retained this year then the implication is that the difference between $30,300 and $8,000 was payed out as dividends.

`Dividends paid =$30,300-$8,000 = $22,800`