The following information pertains to Alpha Computing at the end of 2012: $$\begin{array} { | l | r | }
\hline \text { Assets } & \$ 970,000 \
\hline \text { Liabilities } & \$ 560,000 \
\hline \text { Net Income } & \$ 90,000 \
\hline \text { Common Stock } & \$ 350,000 \
\hline
\end{array}$$ Alpha Computing's Retained Earnings account had a zero balance at the beginning of 2012. What amount of dividends did the company pay in 2012?

Question

The following information pertains to Alpha Computing at the end of 2012: $$\begin{array} { | l | r | } 
\hline \text { Assets } & \$ 970,000 \
\hline \text { Liabilities } & \$ 560,000 \
\hline \text { Net Income } & \$ 90,000 \
\hline \text { Common Stock } & \$ 350,000 \
\hline
\end{array}$$ Alpha Computing's Retained Earnings account had a zero balance at the beginning of 2012. What amount of dividends did the company pay in 2012?

Quizplus · Accepted Answer

Retained Earnings = Net Income - Dividends. Since Retained Earnings at the end of 2012 is Assets - Liabilities - Common Stock = $970,000 - $560,000 - $350,000 = $60,000, and Net Income is $90,000, Dividends = $90,000 - $60,000 = $30,000.

The Following Information Pertains to Alpha Computing at the End