Explanation:
The relationship between retained earnings, net income, and dividends is given by the formula:
Ending Retained Earnings = Beginning Retained Earnings + Net Income - Dividends
Given:
$1,500$2,000$400Rearranging the formula to solve for net income:
Net Income = Ending Retained Earnings - Beginning Retained Earnings + Dividends
Net Income = $2,000 - $1,500 + $400
Net Income = $500 + $400
Net Income = $900
Therefore, the correct answer is C. 900.
Verification:
Beginning RE: $1,500
Add: Net Income: $900
Less: Dividends: $400
Ending RE: $1,500 + $900 - $400 = $2,000 ✓
Ultimate access to all questions.
An analyst gathers the following information (in $ thousands) about a company:
| Beginning retained earnings | 1,500 |
|---|---|
| Ending retained earnings | 2,000 |
| Dividends declared and paid | 400 |
If there are no other items affecting shareholders' equity, net income (in $ thousands) is:
A
B
C
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