Question

Consider the following facts for Espresso Place:

a. Beginning and ending Retained Earnings are $48,000 and $70,000, respectively. Net income for the period is $64,000.
b. Beginning and ending Plant Assets are $122,300 and $130,300, respectively.
c. Beginning and ending Accumulated Depreciation-Plant Assets are $21,300 and $24,300, respectively.
d. Depreciation Expense for the period is $17,000 and acquisitions of new plant assets total $26,000. Plant assets were sold at a $5,000 gain. Requirements
How much are cash dividends?
Cash dividends are $ ___.

Answer 1

Cash dividends paid by Espresso Place amount to $42,000, calculated by subtracting the ending retained earnings from the sum of the beginning retained earnings and net income.

Step-by-step explanation:

To calculate the cash dividends paid by Espresso Place, we need to understand the relationship between retained earnings, net income, and dividends. The retained earnings at the end of a period are equal to the beginning retained earnings plus net income minus dividends paid during the period. Thus:

Ending Retained Earnings = Beginning Retained Earnings + Net Income - Dividends

Using the figures provided for Espresso Place:

$70,000 = $48,000 + $64,000 - Dividends

Therefore, we can solve for Dividends:

Dividends = $48,000 + $64,000 - $70,000

Dividends = $112,000 - $70,000

Dividends = $42,000

The cash dividends paid during the period amount to $42,000.