Question

Aikman Company paid dividends of $2,420, $0, $1,480 and $900 over the first four years of the company's existence, respectively. If Retained Earnings has an ending balance of $10,600 at the end of year four, what was the average annual amount of net income (loss) over the first four years for Aikman?

Answer 1

$3850

Step-by-step explanation:

Dividend over first 4 years : $2,420, $0, $1,480 and $900

Ending retained earning = $10,600

Using the relation:

Beginning retained earning + net income - Dividend = Ending retained earning

Beginning retained earning = $0

Total Dividend $(2420 + 0 + 1480 + 900) = $4800

Hence ;

$0 + net income - $4800 = ($10600)

Net income = $10600 + $4800

Net income = $15,400

Over 4 years :

$15400 / 4 = $3850