Question

Suppose for a particular year a firm had comprehensive income of $9,000, a beginning book value of equity of $76,000, and an ending book value of equity of $77,000. Using the clean surplus accounting relation, how much were the firm's dividends that year?

Answer 1

Answer:

B. $8000

Explanation:

Given that

Income = $9000

Beginning book value = 76000

Ending book value = 77000

Dividends = Income + beginning book value of equity - ending book value of equity.

Therefore,

Dividends = 9000 + 76000 - 77000

= 85000 - 77000

= $8000

Thus, dividends for the following year given the following data is = $8000

Answer 2

Answer:

$8,000

Explanation:

From the example given, let us recall the following,

A firm had a comprehensive income of =$9,000

A beginning book value of equity =$76,000

The ending book value of equity = $ 77,000

Then

By using the clean surplus accounting relation, the firm's dividends for that year is:

(Comprehensive income + book value of equity) - Ending book value of equity

The final value becomes

= $9,000 + $76,000 - $77,000 = $8,000