Question

ABC had the following net income (loss) the first three years of operation: $7,000, ($1,600), and $3,600. If the Retained Earnings balance at the end of year three is $1,000, what was the total amount of dividends paid over these three years?

Answer 1

Answer:

$8,000

Explanation:

As we know that

Ending balance of retained earnings = Beginning balance of retained earnings + net income - dividend paid

where,

Ending balance of retained earnings = $1,000

Beginning retained earning we assume zero

And, the net income for three years is

= $7,000 - $1,600 + $3,600

= $9,000

So, the dividend amount is

= $9,000 - $1,000

= $8,000

We simply applied the above formula