On 12/31/10, Heaton Industries Inc. reported retained earnings of $675,000 on its balance sheet, and it reported that it had $172,500 of net income during the year. On its previous balance sheet, at 12/31/09, the company had reported $555,000 of retained earnings. No shares were repurchased during 2010. How much in dividends did Heaton pay during 2010?

Question

Quizplus · Accepted Answer

Retained earnings at 12/31/09 = $555,000
Net income for 2010 = $172,500
Therefore, retained earnings at 12/31/10 = $727,500 ($555,000 + $172,500)
Dividends paid during 2010 = Retained earnings at 12/31/10 - Retained earnings at 12/31/09 = $727,500 - $675,000 = $52,500

Therefore, the answer is C.