Ultra Inc. had $100 million in retained earnings at the beginning of the year. During the year, the firm paid $0.25 per share dividend and generated $2.00 earnings per share. The firm has 10 million shares outstanding. At the end of year, what was the level of retained earnings for GW?
A) $100 million
B) $117.5 million
C) $120 million
D) $145 million

Question

Quizplus · Accepted Answer

The firm paid a total dividend of $0.25 per share * 10 million shares = $2.5 million. It generated earnings of $2.00 per share * 10 million shares = $20 million. The retained earnings at the end of the year would be the beginning retained earnings ($100 million) plus the earnings generated ($20 million) minus the dividends paid ($2.5 million), which equals $117.5 million.

Ultra Inc Had $100 Million in Retained Earnings at the Beginning