86. Ningbo Steel had year end 2011 and 2012 retained earnings balances of $5,000,000 and $6,000,000 respectively. The firm paid $100,000 of dividends in 2012. Based on this information, Ningbo Steel’s net profit after taxes in 2012 was:

Question

86.	Ningbo Steel had year end 2011 and 2012 retained earnings balances of $5,000,000 and $6,000,000 respectively.  The firm paid $100,000 of dividends in 2012.  Based on this information, Ningbo Steel’s net profit after taxes in 2012 was:

Quizplus · Accepted Answer

The change in the retained earnings balance from 2011 to 2012 is equal to the net profit after taxes for 2012, minus any dividends paid.

So, the net profit after taxes for 2012 can be calculated as:

Net profit after taxes = Retained earnings end of 2012 - Retained earnings end of 2011 + Dividends paid 
Net profit after taxes = $6,000,000 - $5,000,000 + $100,000
Net profit after taxes = $1,100,000

Therefore, the answer is D) $1,100,000.

86 Ningbo Steel Had Year End 2011 and 2012 Retained Earnings