Volt Corp.reported the following information for the year ended December 31, 2016: $$\begin{array} { l r }
\text { Revenues } & \$ 50,000 \
\text { Expenses } & 20,000 \
\text { Retained earnings at December } 31,2016 & 100,000 \
\text { Retained earnings at December } 31,2015 & 105,000
\end{array}$$ ? How much was paid out in dividends by Volt in 2016?
A) $ 20,000
B) $ 25,000
C) $ 30,000
D) $ 50,000

Question

Volt Corp.reported the following information for the year ended December 31, 2016: $$\begin{array} { l r } 
\text { Revenues } & \$ 50,000 \
\text { Expenses } & 20,000 \
\text { Retained earnings at December } 31,2016 & 100,000 \
\text { Retained earnings at December } 31,2015 & 105,000
\end{array}$$ ? How much was paid out in dividends by Volt in 2016?
A) $ 20,000
B) $ 25,000
C) $ 30,000
D) $ 50,000

Quizplus · Accepted Answer

The dividends paid can be calculated by starting with the change in retained earnings, then adjusting for net income (revenues minus expenses). The retained earnings decreased from $105,000 at the end of 2015 to $100,000 at the end of 2016, a decrease of $5,000. However, the company had a net income of $30,000 ($50,000 in revenues minus $20,000 in expenses) which would have increased retained earnings if not for the dividends paid out. Therefore, the dividends paid must have been $30,000 (net income) plus $5,000 (decrease in retained earnings), totaling $25,000.

Volt CorpReported the Following Information for the Year Ended December 31