Question

Aikman Company paid dividends of $2,410, $0, $1,570 and $1,060 over the first four years of the company's existence, respectively. If Retained Earnings has an ending balance of $9,700 at the end of year four, what was the average annual amount of net income (loss) over the first four years for Aikman?
A. $840.B. $14,740.C. $3,685.D. $1,260.

Answer 1

Answer:

C. $3,685

Explanation:

Total dividends paid in first 4 years

= $2,410 + $0 + $1,570 + $1,060

= $5,040

Retained Earnings ending balance is the net of the total income earned over the years less the total dividend paid through the years.

Retained Earnings ending balance = Total income -  total dividend paid

$9,700 = Total income - $5,040

Total Income = $9,700 + $5,040

= $14,740

Average annual amount of net income (loss) over the first four years for Aikman

= $14,740/4

= $3,685

Option C.