A firm had year end 2004 and 2005 retained earnings balance of $670,000 and $560,000, respectively. The firm reported net profits after taxes of $100,000 in 2005. The firm paid dividends in 2005 of
A) $10,000.
B) $100,000.
C) $110,000.
D) $210,000.

Question

Quizplus · Accepted Answer

The decrease in retained earnings from 2004 to 2005 is $110,000 ($670,000 - $560,000). Since the net profit was $100,000, the dividends paid must have been $210,000 to account for the decrease in retained earnings.

A Firm Had Year End 2004 and 2005 Retained Earnings