Soccer Starz, Inc. started the year with a balance of retained earnings of $25 million and ended the year with retained earnings of $32 million. The company paid dividends of $2 million to the preferred stock holders and $6 million to common stock holders. What was Soccer Starz's net income for the year?
A) $7 million
B) $15 million
C) $40 million
D) $49 million

Question

Quizplus · Accepted Answer

The net income 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 $32 million - $25 million = $7 million. Adding the dividends paid to preferred ($2 million) and common stockholders ($6 million) gives $7 million + $2 million + $6 million = $15 million.