Question

Retained Earnings had a balance on January 1, 2017, and December 31, 2017, respectively, of $234,500 and $411,000. Net income for the year was $199,500 and the only other event affecting Retained Earnings was the declaration of dividends. If there was no change in the Dividends account during the year, the payments for dividends were:

a) $376,000
b) $176,500
c) $23,000
d) $0

Answer 1

The change in retained earnings is calculated by subtracting dividends from net income. The payments for dividends were $0 (option d).

Step-by-step explanation:

A retained earnings account tracks the accumulated profits or losses of a company since its inception. To calculate the change in retained earnings, we need to consider the net income and dividends. The formula to calculate the change in retails earnings is: Change in Retained Earnings = Net Income - Dividends. In this case, the net income is $199,500 and there was no change in the Dividends account, so the change in retained earnings is $199,500. Therefore, the payments for dividends were $0 (option d).