A company's retained earnings increased $16,000 during the current year. What was the company's current year net income or loss given that the company declared $30,000 of dividends during this year? Multiple Choice Net income was $14,000. Net income was $46,000. Net loss was $46,000. Net loss was $14,000.
A company's retained earnings increased $16,000 during the current year. What was the company's current year net income or loss given that the company declared $30,000 of dividends during this year? Multiple Choice Net income was $14,000. Net income was $46,000. Net loss was $46,000. Net loss was $14,000.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
![### Understanding Retained Earnings and Net Income
Retained earnings represent the portion of a company's profits that are not distributed as dividends but are retained for reinvestment in the business. In evaluating a company's financial performance, it is important to understand how retained earnings integrate with net income and dividend declarations.
### Scenario Analysis
**Question:**
A company's retained earnings increased by $16,000 during the current year. What was the company's current year net income or loss given that the company declared $30,000 of dividends during this year?
**Multiple Choice Options:**
- O Net income was $14,000.
- O Net income was $46,000.
- O Net loss was $46,000.
- O Net loss was $14,000.
### Explanation:
To solve this problem, consider the formula for calculating retained earnings:
\[ \text{Retained Earnings End} = \text{Retained Earnings Begin} + \text{Net Income (or Net Loss)} - \text{Dividends Paid} \]
Given:
- Increase in Retained Earnings = $16,000
- Dividends Declared = $30,000
**Step-by-Step Calculation:**
1. Set up the equation incorporating the given information:
\[ 16,000 = \text{Net Income (or Net Loss)} - 30,000 \]
2. Solve for Net Income (or Net Loss):
\[ \text{Net Income (or Net Loss)} = 16,000 + 30,000 \]
\[ \text{Net Income (or Net Loss)} = 46,000 \]
Therefore, the correct answer is:
- O Net income was $46,000.
### Conclusion:
By understanding the relationship between retained earnings, net income, and dividends, you can determine the financial performance of a company more effectively. In the provided scenario, the company's net income for the year was $46,000, considering the increase in retained earnings and the dividends declared.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F2cc252ba-0a9a-47d1-a55e-68b3c3895ea6%2F05770167-6129-4a1a-bc3f-f3f4ca6616f7%2Fhajh74_processed.jpeg&w=3840&q=75)
Transcribed Image Text:### Understanding Retained Earnings and Net Income
Retained earnings represent the portion of a company's profits that are not distributed as dividends but are retained for reinvestment in the business. In evaluating a company's financial performance, it is important to understand how retained earnings integrate with net income and dividend declarations.
### Scenario Analysis
**Question:**
A company's retained earnings increased by $16,000 during the current year. What was the company's current year net income or loss given that the company declared $30,000 of dividends during this year?
**Multiple Choice Options:**
- O Net income was $14,000.
- O Net income was $46,000.
- O Net loss was $46,000.
- O Net loss was $14,000.
### Explanation:
To solve this problem, consider the formula for calculating retained earnings:
\[ \text{Retained Earnings End} = \text{Retained Earnings Begin} + \text{Net Income (or Net Loss)} - \text{Dividends Paid} \]
Given:
- Increase in Retained Earnings = $16,000
- Dividends Declared = $30,000
**Step-by-Step Calculation:**
1. Set up the equation incorporating the given information:
\[ 16,000 = \text{Net Income (or Net Loss)} - 30,000 \]
2. Solve for Net Income (or Net Loss):
\[ \text{Net Income (or Net Loss)} = 16,000 + 30,000 \]
\[ \text{Net Income (or Net Loss)} = 46,000 \]
Therefore, the correct answer is:
- O Net income was $46,000.
### Conclusion:
By understanding the relationship between retained earnings, net income, and dividends, you can determine the financial performance of a company more effectively. In the provided scenario, the company's net income for the year was $46,000, considering the increase in retained earnings and the dividends declared.
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