Question

Bagwell's net income for the year ended December 31, Year 2 was $193,000. Information from Bagwell's comparative balance sheets is given below. Compute the cash paid for dividends during Year 2. At December 31 Year 2 Year 1 Common Stock, $5 par value $ 508,000 $ 457,200 Paid-in capital in excess of par 956,000 860,200 Retained earnings 696,000 589,200

Answer 1

The cash paid for dividends during Year 2 is $86,200

Step-by-step explanation:

For computing how much cash is paid for dividend during a year, first we have to compute the difference of retained earning. After that subtract the above balance from the second year net income amount.

In mathematically,

1. Difference in retained earnings = Year 2 balance - Year 1 balance

= $696,000 - $589,200

= $106,800

Now, cash dividend is equals to

= Year 2 net income - Difference in retained earnings -

= $193,000 - $106,800

= $86,200

Hence, the cash paid for dividends during Year 2 is $86,200

Answer 2

$86,200

Step-by-step explanation:

Given:

Net income for the second year = $193,000

Retained earning for the year 1 = 589,200

Retained earning for the year 2 = 696,000

Common Stock, $5 par value for the year 1 = $ 457,200

Common Stock, $5 par value for the year 2 = $ 508,000

Paid-in capital in excess of par for the year 1 = 860,200

Paid-in capital in excess of par for the year 2 = 956,000

Now,

the cash paid for the dividend during year 2 will be calculated as:

⇒ Cash paid dividend during 2 year = Difference in retained earnings - Net income for second year

also,

Difference in retained earnings = Retained earning for the year 2 – Retained earning for the year 1

or

⇒ 696,000 – 589,200

or

Difference in retained earnings = $106,800

thus, substituting the values, we get

Cash paid dividend during 2 year = $106,800 - $193,000

or

Cash paid dividend during 2 year = - $86,200 (negative answer depicts the cash paid)

hence,

Cash paid dividend during 2 year is $86,200