Question

Over the first four years of the company's life, the company earned the following net income (loss): S $3,000; $6,000, and ($2,000). If the company's ending retained earnings is $10,000 after year 4, what is the average amount of dividends paid per year?
a) 6,000;
b) $ 0
c) $7,000.
d) $750
e) $3,000.

Answer 1

Answer:

The answer is D.

Explanation:

Total earnings in 4 years

= 6000 + 3000 + 6000 - 2000

= $13,000

Ending retained earnings after 4 years

= $10,000

Total amount paid out as dividend in 4 years

= $13,000 - 10,000

= $3,000

Average amount of dividends paid per year

= $3,000/4

= $750