Rockwell Corporation had net income of $150,000 for the year ending 2008.The company decided to payout 40% of earnings per share as a dividend.Rockwell has 120,000 shares issued and outstanding.What are the retained earnings for 2008?
A)$40,000
B)$60,000
C)$90,000
D)$150,000
E)None of the above

Question

Quizplus · Accepted Answer

40% of the earnings per share is given as a dividend, which means the dividend amount is 0.4 x (net income/number of shares). 
Dividend per share = (0.4 x $150,000)/120,000 = $0.50 per share. 
Total dividends = $0.50 x 120,000 = $60,000. 
Retained earnings = Net income - dividends =$150,000 - $60,000 = $90,000. 
Therefore, the correct answer is option C.

Rockwell Corporation Had Net Income of $150,000 for the Year