Question

Fashion, Inc. had a Retained Earnings balance of $16,000 at December 31, 2021. The company had an average income of $6,500 over the next 3 years, and an ending Retained Earnings balance of $15,000 at December 31, 2024. What was the total amount of dividends paid over the last three years

Answer 1

Answer:

Total amount of dividends paid over the last three years is $20500

Explanation:

The net income of the company is either retained in the company or paid out as dividends. To calculate the value of the ending retained earnings, we use the following formula,

Ending balance = Beginning balance + Net Income - Dividends

We first need to calculate the total net income for the 3 year period. The total net income for the 3 year period is, 3 * 6500 = $19500

Plugging in the available values for the ending and beginning balance of retained earnings and net income, we can calculate the value of total dividends paid for the three year period.

15000 = 16000 + 19500 - Dividends

Dividends = 35500 - 15000

Dividends = $20500