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At the beginning of its current fiscal year, Willie Corp
At the beginning of its current fiscal year, Willie Corp.'s balance sheet showed assets of $13,300 and liabilities of $5,000. During the year, liabilities decreased by $1,500. Net income for the year was $3,800, and net assets at the end of the year were $9,400. There were no changes in paid-in capital during the year.
Required:
Calculate the dividends, if any, declared during the year.
| Stockholders? Equity | ||||||||
| Assets | = | Liabilities | + | PIC | + | RE | ||
| Beginning: | $ 13,300 | = | $ 5,000 | + | 0 | + | $ 8,300 | |
| Changes: | = | (1,500) | + | 0 | + | 3,800 | + Net income | |
| -Dividends | ||||||||
| Ending: | = | $ 3,500 | + | 0 | + |
Expert Solution
Answer : $2,700
To calculate dividends for the year we need to take note of the following:
Asset, beg. = $13,300
Liabilities, beg. = $5,000
PIC, beg ($13,300-$5,000) = $8,300
If net assets at the end of the year was $9,400 and no changes in PIC during the year, therefore, retained earnings at the end of the year would be $1,100 ($9,400 - $8,300)
Given the data above, dividends can be computed as follows:
| RE, beg. | $ - |
| Add: Net Income | 3,800 |
| Less: RE, end | 1,100 |
| Dividends | $2,700 |
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