Tantramar Corporation has the following shareholders equity on July 31, 2013:
-Assume that on June 15, 2014, Tantramar paid the preferred dividend for the current year (there were no dividends in arrears) and paid a dividend of $2 to each common shareholder. The company earned $45,000 in profit during 2014. The July 31, 2014 financial statements will show an ending balance in retained earnings of
A) $500,000.
B) $545,000.
C) $475,000.
D) $430,000.

Question

Tantramar Corporation has the following shareholders equity on July 31, 2013: 
-Assume that on June 15, 2014, Tantramar paid the preferred dividend for the current year (there were no dividends in arrears) and paid a dividend of $2 to each common shareholder. The company earned $45,000 in profit during 2014. The July 31, 2014 financial statements will show an ending balance in retained earnings of
A) $500,000. 
B) $545,000. 
C) $475,000. 
D) $430,000.

Quizplus · Accepted Answer

The retained earnings at the beginning of the year were $500,000. The company earned $45,000 in profit, making it $545,000. After paying dividends to preferred and common shareholders, the retained earnings would be reduced. Assuming the preferred dividend was paid and $2 per common share was distributed, the ending balance would be $475,000.

Tantramar Corporation Has the Following Shareholders Equity on July 31