Papaya Inc. has 100,000 common shares outstanding and has a policy of paying a $1.30 annual dividend for each of these shares. Papaya has an income tax rate of 35%, and its retained earnings statement for 2020 reported a closing balance of $1,452,000. Assuming an opening retained earnings balance of zero, dividend payments according to its usual policy, and no other adjustments, Papaya's 2020 net income was
A) $1,536,500.
B) $2,364,846.
C) $1,452,000.
D) $1,582,000.

Question

Quizplus · Accepted Answer

Papaya Inc. paid $1.30 in dividends for each of its 100,000 shares, totaling $130,000 in dividends. To find the net income, add the dividends paid to the closing retained earnings balance: $1,452,000 + $130,000 = $1,582,000.