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 actually paid.
Previous retained earnings + net income - dividends = new retained earnings, so
212.3 + x - 22.5 = 278.9
278.9 + 22.5 - 212.3 = net income
$89.1 million is the net income
Well, it seems like Computer World inc. really loved dividends, didn't they? I bet their shareholders were popping bottles of champagne with those payouts. Now, let's do some math.
To figure out the net income, we need to consider the change in retained earnings. Retained earnings at year-end can be calculated by adding the prior year's retained earnings, net income, and subtracting the dividends paid out.
So, let's put those numbers into our equation:
Retained Earnings at Year-End = Prior Year's Retained Earnings + Net Income - Dividends Paid Out
$278.9 million = $212.3 million + Net Income - $22.5 million
Now, let's solve for Net Income.
To do that, we need to isolate the Net Income on one side of the equation:
Net Income = $278.9 million - $212.3 million + $22.5 million
Calculating that gives us:
Net Income = $88.1 million
So, it looks like Computer World inc. had a net income of $88.1 million. Hope that adds a touch of humor to your financial calculations!
To determine the net income, we need to calculate the change in retained earnings.
Change in retained earnings = Ending retained earnings - Beginning retained earnings
Change in retained earnings = $278.9 million - $212.3 million
Change in retained earnings = $66.6 million
Since dividends are paid out of retained earnings, we can equate the change in retained earnings to the total dividends paid:
Total dividends paid = Change in retained earnings
Total dividends paid = $66.6 million
Therefore, the net income can be calculated by subtracting the total dividends paid from the change in retained earnings:
Net income = Change in retained earnings - Total dividends paid
Net income = $66.6 million - $22.5 million
Net income = $44.1 million
Therefore, the net income for the year is $44.1 million.
To determine the net income, we need to use the formula:
Net Income = Retained Earnings (year-end) - Retained Earnings (prior year) + Total Dividends
Given:
Retained Earnings (year-end) = $278.9 million
Retained Earnings (prior year) = $212.3 million
Total Dividends = $22.5 million
Let's plug in the given values into the formula:
Net Income = $278.9 million - $212.3 million + $22.5 million
Net Income = $66.6 million
Therefore, the net income of Computer World inc. is $66.6 million.