The ending Retained Earnings balance of Lambert Inc.increased by $1.5 million from the beginning of the year.The company's net income earned during the year is $3.5 million.What is the amount of dividends Lambert Inc.declared and paid?

Question

Quizplus · Accepted Answer

The increase in Retained Earnings of $1.5 million comes from two sources - Net Income earned during the year and dividends declared and paid. As the Net Income earned during the year is given to be $3.5 million, we can calculate the dividends declared and paid as follows:
Dividends = Increase in Retained Earnings - Net Income earned during the year
Dividends = $1.5 million - $3.5 million
Dividends = -$2.0 million
This means that the company did not pay any dividends, but rather retained the entire Net Income earned during the year, resulting in an increase of $1.5 million in its Retained Earnings balance. Therefore, the correct answer is C.

The Ending Retained Earnings Balance of Lambert Inc