Question

At the end of the current year, Smith Software Inc. reported $27 million of net income and $420 million of retained earnings. The previous year, Smith had $395 million of retained earnings. What were the total dividends paid to shareholders during the most recent year

Answer 1

Answer:

Dividends paid is $2 millions

Explanation:

The change in retained earnings during the year can be calculated by taking the difference between the opening and the closing balance which is calculated as under:

Change in Retained Earnings = $420 million - $395 million = $25 millions

The change in retained earnings during the year is the share of Net income retained by the company which means the remainder amount which is not retained by the company is Dividend paid.

And

Dividends paid = $27 million Net Income - $25 million Earnings Retained

Dividends paid = $2 millions