Question

The net income of​ Harriet, Inc. for the year is $40,000. The dividends declared during the year were $51,000. Which of the following statements is​ true?

a) Harriet, Inc. faced a deficit for the year.
b) Harriet, Inc. faced a surplus for the year.
c) Harriet, Inc. broke even for the year.
d) Harriet, Inc. faced a loss for the year.

Answer 1

Harriet, Inc. faced a deficit for the year as it declared dividends of $51,000 which exceeded its net income of $40,000, leading to a shortfall of $11,000.

Step-by-step explanation:

The query at hand relates to Harriet, Inc., a company that reported a net income of $40,000 for the year while declaring dividends totaling $51,000. From an accounting standpoint, this situation suggests the company disbursed more in dividends than it earned in net income, resulting in a drawdown of retained earnings or potentially tapping into other funds. Therefore, the correct answer to the question is that Harriet, Inc. faced a deficit for the year.