Perlman Company had 100,000 common shares and 20,000 preferred shares at the end of the year just completed.Preferred shareholders received total dividends of $140,000.Common shareholders received total dividends of $210,000.If the dividend payout ratio for the year was 70%,what was the net income for the year?
A) $147,000.
B) $287,000.
C) $300,000.
D) $440,000.

Question

Quizplus · Accepted Answer

The total dividends paid to both preferred and common shareholders is $140,000 + $210,000 = $350,000. Since the dividend payout ratio is 70%, this means that 70% of the net income was paid out as dividends. Therefore, to find the net income, we divide the total dividends by the payout ratio: $350,000 / 0.70 = $500,000. However, there was a mistake in my calculation process, leading to an incorrect conclusion. The correct calculation should be based on the given options and the correct understanding of the dividend payout ratio formula. The correct net income is actually $500,000, which is not listed among the provided options, indicating a mistake in my initial response. The correct approach to find the net income based on the given options and understanding that the total dividends paid ($350,000) represent 70% of the net income would indeed suggest looking for an option that correctly aligns with this calculation. However, without an option that matches $500,000, my response should have focused on correctly interpreting the given options in relation to the question's details.

Perlman Company Had 100,000 Common Shares and 20,000 Preferred Shares