Papaya Inc.has 100,000 common shares outstanding and has a policy of paying a $1.30 annual dividend for each of these shares.Papaya has an income tax rate of 35%, and its retained earnings statement for 2017 reported a closing balance of $1,452,000.Assuming an opening retained earnings balance of zero, dividend payments according to its usual policy, and no other adjustments, Papaya's 2017 net income was
A)$1,536,500.
B)$2,364,846.
C)$1,452,000.
D)$1,582,000.

Question

Quizplus · Accepted Answer

Papaya Inc. paid $130,000 in dividends (100,000 shares * $1.30). The closing retained earnings balance is $1,452,000, which means net income was $1,582,000 ($1,452,000 + $130,000 in dividends).