On 12/31/08, 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 12/31/07, the company had reported $445,000 of retained earnings. No shares were repurchased during 2008. How much in dividends did the firm pay during 2008?

Question

Quizplus · Accepted Answer

We can use the formula: 
Retained Earnings = Previous Retained Earnings + Net Income - Dividends Paid

Rearranging this formula, we get: 
Dividends Paid = Previous Retained Earnings + Net Income - Retained Earnings

Substituting the given values: 
Dividends Paid = $445,000 + $135,000 - $525,000 
Dividends Paid = $55,000

Therefore, the firm paid $55,000 in dividends during 2008.

On 12/31/08, Hite Industries Reported Retained Earnings of $525,000 on Its