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Fundamentals of Financial Manageme...

14th Edition
Eugene F. Brigham + 1 other
ISBN: 9781285867977

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BuyFindarrow_forward

Fundamentals of Financial Manageme...

14th Edition
Eugene F. Brigham + 1 other
ISBN: 9781285867977
Textbook Problem

STATEMENT OF STOCKHOLDERS’ EQUITY Computer World Inc. paid out $22 5 million in total common dividends and reported $278 9 million of retained earnings at year-end. The prior year’s retained earnings were $212 3 million. What was the net income? Assume that all dividends declared were actually paid.

Summary Introduction

To compute: The net income for Company C.

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 income is called retained earnings.

Explanation

Solution:

Given,

Dividends are $22.5 million.

Ending retained earnings are $278.9 million.

Beginning retained earnings are $212.3 million.

Formula to compute net income,

Net Income=[Ending Retained Earnings+DividendsBeginning Retained Earnings]

Substitute $22.5 million for dividends, $278

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