Bike and Hike, Inc. started the year with a balance of retained earnings of $100 million and ended the year with retained earnings of $128 million. The company paid dividends of $9 million to the preferred stock holders and $22 million to common stock holders. What was Bike and Hike's net income for the year?
A) $28 million
B) $31 million
C) $59 million
D) $128 million

Question

Quizplus · Accepted Answer

Bike and Hike's net income for the year can be calculated by adding the dividends paid to both preferred and common stockholders to the increase in retained earnings. The increase in retained earnings is $128 million - $100 million = $28 million. Adding the dividends paid to preferred ($9 million) and common stockholders ($22 million) gives $28 million + $9 million + $22 million = $59 million.