Question

Dad’s Towing Inc. began and ended the year with a Retained Earnings balance of $420,000 and $530,000, respectively. Dad’s reported Net Income during the year of $185,000. The only transaction that affected Retained Earnings was the declaration and payment of a cash dividend. Determine the amount of dividends declared and paid by Dad’s Towing during the year.

Answer 1

$75,000

Step-by-step explanation:

Given the following information about Dad’s Towing Inc.

Opening retained earnings = $420,000

Closing retained earnings = $530,000

Net Income during the year = $185,000

The only transaction that affected Retained Earnings was the declaration and payment of a cash dividend

Opening retained earnings + Net Income during the year - Dividend declared and paid = Closing retained earnings

$420,000 + $185,000 - Dividend declared and paid = $530,000

Dividend declared and paid = $420,000 + $185,000 - $530,000

= $75,000