On January 1, 2016, A-Best Company's balance in retained earnings was $80,000.At the end of the year, December 31, 2016, the balance in retained earnings was $94,000.During 2016, the company earned net income of $40,000.How much were dividends?
A) $16,000
B) $24,000
C) $26,000
D) $64,000

Question

Quizplus · Accepted Answer

Dividends can be calculated as the increase in retained earnings from the beginning of the year to the end of the year, minus net income for the year. Using this formula, dividends for A-Best Company would be calculated as follows:

Dividends = Ending retained earnings - Beginning retained earnings - Net income 
Dividends = $94,000 - $80,000 - $40,000 
Dividends = $26,000

Therefore, the correct answer is choice C, $26,000.

On January 1, 2016, A-Best Company's Balance in Retained Earnings