Question

. Willie Company's retained earnings increased $20,000 during 2010. What was Willie's 2010 net income or loss given that Willie declared $25,000 of dividends during 2010?
A. Net income was $5,000
.B.Net income was $45,000.
C. Net loss was $45,000.
D. Net loss was $5,000.

Answer 1

Answer:

$45,000

Explanation:

Retained earnings are a part of profits that the company opts not to distribute to shareholders as dividends.  As the name suggests, retained earnings are the profits that the business keeps for itself.

Dividends are profits that a  business shares with the shareholders.

A business's total income can there be kept as retained earnings, shared as dividends, or both.

For Willie company: Net income will be consist of an increase in retained earnings, and the dividend declared.

Net income = Retained earning + Dividends

i.e., $20,000 +$25,000

=$45,000