Rockwell plc had net income of £150,000 for the last ﬁnancial year.The company decided to pay out 40% of earnings per share as a dividend.Rockwell has 120,000 shares issued and outstanding.
What are the retained earnings?
A)£ 40,000
B)£ 60,000
C)£ 90,000
D)£150,000
E)None of the above.

Question

Quizplus · Accepted Answer

The dividend payout will be 40% of earnings per share. Since we know that there are 120,000 shares issued and outstanding, we can calculate the total dividend payout as:

Dividend payout = 40% of earnings per share x number of shares issued and outstanding
= (40/100) x (Net income/number of shares issued and outstanding) x number of shares issued and outstanding
= (40/100) x Net income
= (40/100) x £150,000
= £60,000

To calculate retained earnings, we need to subtract the dividend payout from the net income:

Retained earnings = Net income - Dividend payout
= £150,000 - £60,000
= £90,000

Therefore, the answer is C)£ 90,000.

Rockwell Plc Had Net Income of £150,000 for the Last