A firm has year end 2001 and 2002 retained earnings balances of $670,000 and $560,000, respectively. The firm reported net profits after taxes of $100,000 in 2002. The firm paid dividends in 2002 of__________ .
A) $210,000
B) $110,000
C) $100,000
D) $10,000

Question

Quizplus · Accepted Answer

The change in retained earnings from 2001 to 2002 is $560,000 - $670,000 = -$110,000. Since the firm reported net profits of $100,000, the dividends paid must be $100,000 (net profit) + $110,000 (decrease in retained earnings) = $210,000.

A Firm Has Year End 2001 and 2002 Retained Earnings