Use the information given below to answer the following questions:
During the year, Grasso Ltd sold 2000 items at $30 each. The cost price of the items was $22 each. Operating expenses totalled $7000 and income tax expense was $4000.
-If this were the first year of Grasso Ltd's operations,what is the maximum amount that could be paid out in dividends to shareholders?
A) $5000
B) $16 000
C) $60 000
D) $9000

Question

Quizplus · Accepted Answer

Net income = (Sales - Cost of goods sold) - Operating expenses - Income tax expense= (2000 x $30 - 2000 x $22) - $7000 - $4000= $16000Maximum dividends = Net income= $16000

Use the Information Given Below to Answer the Following Questions