Butler Corp.'s Retained Earnings balance at the end of 2009 and 2010 was $435,000 and $573,000, respectively. During 2010, Butler's net income was $295,000. Both cash and stock dividends were declared and settled during 2010. The total stock dividend was $28,000. During 2010, how much cash did Butler use for dividends?

Question

Quizplus · Accepted Answer

The change in Retained Earnings (RE) from 2009 to 2010 is the net income minus the total dividends paid. The change in RE is $573,000 - $435,000 = $138,000. The net income is $295,000, so the total dividends paid (cash + stock) is $295,000 - $138,000 = $157,000. Since the stock dividends are $28,000, the cash dividends are $157,000 - $28,000 = $129,000.