Question

Red Carpet Industries had retained earnings of $537,500 and $135,000 of net income. On its previous balance sheet, at 12/31/18, the company had reported $445,000 of retained earnings. No shares were purchased during 2019. How much in dividends did the firm pay during 2019?

Answer 1

Answer:

$42,500

Explanation:

Red carpet had retained earnings of $537,500 and a net income of $135,000

On the previous balance sheet the retained earnings that was reported was $445,000

The first step is to calculate the change in retained earnings

= $537,500-$445,000

= $92,500

Therefore the amount of dividend paid by the firm can be calculated as follows

=Net income-change in retained earnings

= $135,000-$92,500

= $42,500

Hence the dividend paid by the firm during 2019 is $42,500