In the first three years of operations,Lindsey Corporation earned net income/loss of -$150,000,$100,000,and $250,000.At the end of the third year,Lindsey Corporation has a balance of $120,000 in its Retained Earnings account.What is the total amount of dividends Lindsey Corporation paid over the three years?
A)$130,000.
B)$120,000.
C)$80,000.

Question

Quizplus · Accepted Answer

To find the total amount of dividends paid over three years, we need to use the Retained Earnings equation:

Retained Earnings = Beginning Retained Earnings + Net Income/Loss - Dividends

We know that at the end of the third year, Lindsey Corporation had a balance of $120,000 in its Retained Earnings account. To find the total dividends paid, we need to calculate the beginning retained earnings for each year.

Year 1: 
Beginning Retained Earnings = 0 
Net Loss = -$150,000 
Dividends = ?

$120,000 = 0 - $150,000 - Dividends 
Dividends = $270,000

Year 2: 
Beginning Retained Earnings = $120,000 
Net Income = $100,000 
Dividends = ?

$220,000 = $120,000 + $100,000 - Dividends 
Dividends = $0

Year 3: 
Beginning Retained Earnings = $120,000 
Net Income = $250,000 
Dividends = ?

$370,000 = $120,000 + $250,000 - Dividends 
Dividends = $80,000

Therefore, the total amount of dividends paid over three years is $270,000 + $0 + $80,000 = $350,000. The answer choices only offer $80,000 or $130,000 as options, and since $350,000 is not one of the choices, the best answer is C, $80,000.

In the First Three Years of Operations,Lindsey Corporation Earned Net