New Orleans Chemicals Company follows the indirect method to prepare its statement of cash flows. Refer to the following portion of the comparative balance sheet: $\begin{array}{c}\text { New Orleans Chemicals Company }\
\text { Comparative Balance Sheet }\
\text { December 31,2018 and 2017}\\begin{array}{|l|r|r|r|}
\hline&2018 & 2017 & \text { Increase/(Decrease) }\
\hline \text { Common Stock } & \$ 33,000 & \$ 2200 & \$ 30,800 \
\hline \text { Retained Earnings } & 155,000 & 89,000 & 66,000 \
\hline \text { Treasury Stock } & (8100) & (5200) & (2900) \
\hline \text { Total Equity } & \$ 179,900 & \$ 86,000 & \$ 93,900 \
\hline
\end{array}\end{array}$ Net Income for 2018 was $91,000.
Based on the above information, determine the amount of dividends declared during 2018.

Question

Quizplus · Accepted Answer

To determine the amount of dividends declared during 2018, we need to look at the change in the Retained Earnings account on the comparative balance sheet. From 2017 to 2018, Retained Earnings decreased from $206,000 to $181,000. We know that Net Income for 2018 was $91,000, so the remainder of the decrease must be due to dividends declared. 
$206,000 - $181,000 + $91,000 = $116,000 (total dividends declared during 2018) 
$116,000 - $91,000 = $25,000 
Therefore, the amount of dividends declared during 2018 is $25,000, which corresponds to choice (D).

New Orleans Chemicals Company Follows the Indirect Method to Prepare