Question

In its recent income statement, Smith Software Inc. reported paying $12 million in dividends to common shareholders, and in its year-end balance sheet, Smith reported $333 million of retained earnings. The previous year, its balance sheet showed $328 million of retained earnings. What was the firm's net income during the most recent year?

Answer 1

Answer:

The firm's net income during the most recent year was $17,000,000

Explanation:

Ending balance in retained earnings is calculated by using following formula:

Ending balance in retained earnings = Beginning balance in retained earnings + Net income - Cash dividends - Stock dividends

Therefore,

Net income = Ending balance in retained earnings - Beginning balance in retained earnings + Cash dividends + Stock dividends  = $333,000,000 - $328,000,000 + $12,000,000 = $17,000,000