On its 2008 balance sheet, Sherman Books showed a balance of retained earnings equal to $510 million. On its 2009 balance sheet, the balance of retained earnings was also equal to $510 million. Which of the following statements is most correct?
A) The company must have had net income equal to zero in 2009.
B) The company did not pay a dividend in 2009.
C) If the company's net income in 2009 was $200 million, dividends paid must have also equaled $200 million.
D) If the company lost money in 2009, they must have paid a dividend.
E) None of the statements above is correct.

Question

Quizplus · Accepted Answer

The retained earnings remained the same from 2008 to 2009, indicating that any net income earned was entirely paid out as dividends. If the net income was $200 million, then $200 million must have been paid as dividends to keep the retained earnings unchanged.

On Its 2008 Balance Sheet, Sherman Books Showed a Balance