For the past year, Jenn's Floral Arrangements had taxable income of $198,600, beginning common stock of $68,000, beginning retained earnings of $318,750, ending common stock of $71,500, ending retained earnings of $316,940, interest expense of $11,300, and a tax rate of 21 percent. What is the amount of dividends paid during the year?

Question

Quizplus · Accepted Answer

To find the dividends paid, we first calculate the net income and then see how the retained earnings have changed, adjusting for any new common stock issued.Net Income = Taxable Income - TaxesTaxes = Taxable Income * Tax Rate = $198,600 * 21% = $41,706Net Income = $198,600 - $41,706 = $156,894Change in Retained Earnings = Ending Retained Earnings - Beginning Retained Earnings + Dividends Paid$316,940 (Ending) - $318,750 (Beginning) = -$1,810 (Decrease in Retained Earnings)Change in Common Stock = Ending Common Stock - Beginning Common Stock = $71,500 - $68,000 = $3,500Since the retained earnings decreased and there was an increase in common stock, the dividends paid can be calculated as:Dividends Paid = Net Income - Change in Retained Earnings - Change in Common StockDividends Paid = $156,894 - (-$1,810) - $3,500 = $158,704Therefore, the amount of dividends paid during the year is $158,704.

For the Past Year, Jenn's Floral Arrangements Had Taxable Income