Question

Aikman Company paid dividends of $2,420, $0, $1,440 and $1,010 over the first four years of the company's existence, respectively. If Retained Earnings has an ending balance of $9,700 at the end of year four, what was the average annual amount of net income (loss) over the first four years for Aikman

Answer 1

$3,642.50

Step-by-step explanation:

For computing the average annual amount of net income (loss), first we have to compute the net income which is shown below:

The ending balance of retained earning = Beginning balance of retained earnings + net income - dividend paid

$9,700 = $0 + Net income - ($2,420 + $0 + $1,440 + $1,010)

$9,700 = $0 + Net income - $4,870

So, the net income is

= $9,700 + $4,870

= $14,570

Now the average annual amount of net income is

=
`(Net\ income)/(Number\ of\ years)`

=
`(\$14,570)/(4)`

= $3,642.50