Question

Salah’s net income for the year ended December 31, Year 2 was $191,000. Information from Salah’s comparative balance sheets is given below. Compute the cash paid for dividends during Year 2. At December 31 Year 2 Year 1 Common Stock, $5 par value $ 506,000 $ 455,400 Paid-in capital in excess of par 954,000 858,400 Retained earnings 694,000 587,400

Answer 1

Answer:

Salah

Cash Dividends during Year 2:

= $84,400

Explanation:

a) Data and Calculations:

Dividends Paid:

Year 1 Retained earnings =  $587,400

Year 2 Net Income =                191,000

Year 2 Retained earnings = (694,000)

Dividends paid =                    $84,400

b) Salah paid dividends worth $84,400.  These represent the difference between the beginning retained earnings with the year 2's net income and the year 2's retained earnings.  It is a reduction of the retained earnings after adding the net income for the year.