Question

Bagwell's net income for the year ended December 31, Year 2 was $175,000. Information from Bagwell's comparative balance sheets is given below. Compute the cash paid for dividends during Year 2. At December 31 Year 2 Year 1 Common Stock, $5 par value $500,000 $450,000 Paid-in capital in excess of par 948,000 853,000 Retained earnings 688,000 582,000 A. $95,000. B. $201,000. C. $69,000. D. $79,000. E. $50,000.

Answer 1

Answer:

C. $69,000

Explanation:

Computation of the cash paid for dividends during Year 2

First step is to calculate the difference in Retained earnings for Year 2 and Year 1

Retained earnings =$688,000-$582,000

Difference in retained earnings =$106,000

Second step is to calculate for the cash paid for dividends during Year 2

Using this formula

Cash paid dividend = Year 2 Net income- Retained earnings difference

Let plug in the formula

Cash paid dividend=$175,000-$106,000

Cash paid dividend =$69,000

Therefore the cash paid for dividends during Year 2 will be $69,000