Question

A company’s retained earnings increased $375,000 last year and its assets increased $973,000. The company declared a $79,000 cash dividend during the year. What was last year’s net income?

A. $296,000.
B. $375,000.
C. $454,000.
D. $519,000.

Answer 1

Answer:

C. $454,000.

Explanation:

We know that

The ending balance of retained earnings = Opening balance of retained earnings + net income - dividend paid

$375,000 = $0 + net income - $79,000

So, the net income would be

= $375,000 + $79,000

= $454,000

The ending balance of retained earnings - Opening balance of retained earnings is also known as increase in retained earning