Question

During the first year of operations, Sunset Surfwear issued 18,500 shares of $10 par common stock. At the end of the year, the corporation had net income of$380,000. The board of directors declared a $5 cash dividend per share of common stock. Answer the following questions in your working papers: 1. How much of the net income earned for the year was paid to the common stockholders? 2. How much of the net income was retained by the corporation?

Solution

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Step 1

1 of 2

Distribution to stockholders:

= 18,500 ×\times $5

= $92,500

Net income retained:

= $380,000 - $92,500

= $287,500

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