Answer:
Total dividends paid out equals = $10 million
Explanation:
Dividends represent the proportion of profits paid out as return to ordinary shareholders for their ownership stake -ordinary share capital- in the business.
Retained earnings is the balance of the profit after the payment of dividends. Retained earnings serves as internal source of finance for company to fund the acquisition of non-current assets and working capital.
The balance in the retained earnings account at the end of the accounting period is computed as follows:
$
Balance at the beginning xxx
add net income made in the current period xxx
less Dividend paid <u> (xxx)</u>
Balance at the end <u> xxx</u>
<u />
<em>So we can apply this to the question; </em>
<em> $</em>
Balance at the beginning 390
add net income made in the current period 25
less Dividend paid <u> ( y )</u>
Balance at the end <u> 405</u>
<em>Dividends is missing, so we represent it with " </em><em>y"</em>
390 + 25 -y = 405
390 + 25 - 405 = y
10= y.
Total dividends paid out equals = $10 million