A company has 5,000 shares of $1 par value common stock and 6,000 shares of 2%,$98 par,noncumulative preferred stock outstanding.The balance in Retained Earnings at the beginning of the year was $750,000.Net income for the current year was $400,000.If the company paid a dividend of $3 per share on its common stock,what is the balance in Retained Earnings at the end of the year?
A)$1,123,240
B)$1,135,000
C)$1,150,000
D)$735,000
E)$723,240

Question

Quizplus · Accepted Answer

The correct answer is A.The company paid $3 per share on its common stock, which means it paid a total of $3 * 5,000 = $15,000 in dividends on common stock. The company also paid $98 * 2% * 6,000 = $11,760 in dividends on preferred stock. Therefore, the total dividends paid were $15,000 + $11,760 = $26,760. The balance in Retained Earnings at the end of the year is $750,000 + $400,000 - $26,760 = $1,123,240.

A Company Has 5,000 Shares of $1 Par Value Common