Question

Bridgewater Furniture has sales of $811,000, costs of $658,000, and interest paid of $21,800. Depreciation expense is $56,100 and the tax rate is 34%. At beginning of year, RE were $318,300 and common stock was $250,000. At end of year, RE were $322,500 and common stock was $280,000. What are dividends paid for the year?

Answer 1

To calculate dividends paid for the year, subtract increase in retained earnings and add increase in common stock. Calculate net income by subtracting expenses and depreciation from sales. Then subtract taxes to find net income after taxes.

Step-by-step explanation:

To calculate the dividends paid for the year, we need to start with the retained earnings (RE) at the beginning of the year and add the net income. Net income is calculated by subtracting expenses (costs and interest paid) and depreciation expense from sales. Then we subtract the taxes to find the net income after taxes. Finally, we subtract the increase in retained earnings (RE) and add the increase in common stock to find the dividends paid for the year.

First, calculate the net income:

Net Income = Sales - Costs - Interest Paid - Depreciation Expense

Next, calculate the net income after taxes:

Net Income After Taxes = Net Income * (1 - Tax Rate)

Now, calculate the dividends paid for the year:

Dividends Paid = (RE at End of Year - RE at Beginning of Year) - (Increase in Common Stock)