Question

A company reports the following​ balances: ​12/31/2018 ​12/31/2019 Common Stock $ 14 comma 000 $ 162 comma 000 Paidminusin Capital in Excess of Par 98 comma 000 110 comma 000 Retained Earnings 68 comma 000 77 comma 000 During​ 2019, dividends of $ 14 comma 000 were declared and paid. What is net income for​ 2019? A. $ 14 comma 000 B. $ 5 comma 000 C. $ 9 comma 000 D. $ 23 comma 000

Answer 1

The net income for 2019 is calculated by adding the dividends to the change in retained earnings. With an ending retained earnings of $77,000, a beginning of $68,000, and dividends of $14,000, the net income is $23,000, which is option D.

Step-by-step explanation:

To find the net income for 2019, we need to analyze the changes in Retained Earnings. The formula to calculate net income (NI) considering dividends paid is as follows:

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

Substituting the given values:

• Ending Retained Earnings (12/31/2019): $77,000

• Beginning Retained Earnings (12/31/2018): $68,000

• Dividends Declared and Paid in 2019: $14,000

We get:

NI = $77,000 - $68,000 + $14,000 = $9,000 + $14,000 = $23,000

Therefore, the net income for 2019 is $23,000, which corresponds to option D.

Answer 2

D. $ 23 comma 000

Step-by-step explanation:

The computation of the net income is shown below:

As we know that

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

$77,000 = $68,000 + net income - $14,000

$77,000 = $54,000 + net income

So, the net income is $23,000

We simply applied the above formula so that the net income could be come