Windmere Corporation had total shareholders' equity of $765,000 at the beginning of the year and $873,000 at the end of the year. Shareholders invested an additional $75,000 in common shares and $15,000 in preferred shares during the year. Net income was $43,000. Calculate the dividends paid for the year.

Question

Quizplus · Accepted Answer

To calculate the dividends paid for the year, start with the change in shareholders' equity. The change is $873,000 (end of year) - $765,000 (beginning of year) = $108,000. This change includes net income and new investments but excludes dividends. Subtract the net income ($43,000) and the additional investments ($75,000 in common shares + $15,000 in preferred shares = $90,000) from the change in equity. So, $108,000 - $43,000 - $90,000 = -$25,000. The negative sign indicates an outflow, so dividends paid were $25,000.

Windmere Corporation Had Total Shareholders' Equity of $765,000 at the Beginning