On 12/31/12, Hite Industries reported retained earnings of $525,000 on its balance sheet, and it reported that it had $135,000 of net income during the year. On its previous balance sheet, at 12/31/11, the company had reported $445,000 of retained earnings. No shares were repurchased during 2012. How much in dividends did the firm pay during 2012?

Question

Quizplus · Accepted Answer

Retained earnings at the end of the year can be calculated as beginning retained earnings plus net income minus dividends. Therefore, dividends paid during the year can be calculated as:

Dividends = Beginning retained earnings + Net income - Ending retained earnings 
Dividends = $445,000 + $135,000 - $525,000 
Dividends = $55,000

Therefore, the answer is C.

On 12/31/12, Hite Industries Reported Retained Earnings of $525,000 on Its