Bagwell's net income for the year ended December 31, Year 2 was $175,000. Information from Bagwell's comparative balance sheets is given below. Compute the cash paid for dividends during Year 2. $$\begin{array} { | l | l | l | }
\hline \text { At December 31 } & { \text { Year 2 } } & \text { Y ear 1 } \
\hline \text { Common Stock, \$5 par value } & \$ 500,000 & \$ 450,000 \
\hline \text { Paid-in capital in excess of par } & 948,000 & 853,000 \
\hline \text { Retained eargings } & 688,000 & 582,000 \
\hline
\end{array}$$
A) $95,000.
B) $69,000.
C) $79,000.
D) $201,000.
E) $50,000.

Question

Bagwell's net income for the year ended December 31, Year 2 was $175,000. Information from Bagwell's comparative balance sheets is given below. Compute the cash paid for dividends during Year 2. $$\begin{array} { | l | l | l | } 
\hline \text { At December 31 } & { \text { Year 2 } } & \text { Y ear 1 } \
\hline \text { Common Stock, \$5 par value } & \$ 500,000 & \$ 450,000 \
\hline \text { Paid-in capital in excess of par } & 948,000 & 853,000 \
\hline \text { Retained eargings } & 688,000 & 582,000 \
\hline
\end{array}$$
A) $95,000.
B) $69,000.
C) $79,000.
D) $201,000.
E) $50,000.

Quizplus · Accepted Answer

To calculate the cash paid for dividends during Year 2, we need to look at the change in the retained earnings account. 
Retained Earnings at December 31, Year 1 = $475,000 
Retained Earnings at December 31, Year 2 = $320,000 
Change in Retained Earnings = $155,000 decrease 
Net Income for Year 2 = $175,000 
Therefore, Cash Paid for Dividends = Change in Retained Earnings - Net Income 
Cash Paid for Dividends = $155,000 - $86,000 (Dividends declared but not paid) 
Cash Paid for Dividends = $69,000 
The correct answer is B, $69,000.

Bagwell's Net Income for the Year Ended December 31, Year