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Fundamentals of Financial Manageme...

9th Edition
Eugene F. Brigham + 1 other
ISBN: 9781305635937

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Fundamentals of Financial Manageme...

9th Edition
Eugene F. Brigham + 1 other
ISBN: 9781305635937
Textbook Problem
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STATEMENT OF STOCKHOLDERS EQUITY Electronics World Inc. paid out $22.4 million in total common dividends and reported $144.7 million of retained earnings at year-end. The prior year’s retained earnings were $955 million. What was the net income? Assume that all dividends declared were actually paid.

Summary Introduction

To compute: The net income for Company E.

Introduction:

Retained Earnings:

The companies retain some portion of their net income to be used in the companies’ operations, expansion plans and other long term assets. That remaining portion of a company’s net incomes is called as retained earnings.

Statement of Stockholders’ Equity:

Statement of stockholders equity reports the opening and closing balance of stockholders equity with the changes incurred during the accounting period.

Explanation

Given,

Amount of dividends paid is $22.4 million.

Ending retained earnings are $144.7 million.

Beginning retained earnings are $95.5 million.

Statement of retained earnings for Company E:

E Company
Statement of Retained Earnings
Particulars

Amount ($)

(in millions)

Beginning balance of retained earnings$95.5
Add: Net Income (balancing figure)$41.6
Retained earnings available$137.1
Less: Dividends ($22.4)
Ending balance of retained earnings$114.7

Retained earnings available

Retained Earnings Available=Ending Retained Earnings+Dividend Paid=$114

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