Based on the information in Table, Calculate the amount of dividends paid by Jones Company in...

Question:

Based on the information in Table, Calculate the amount of dividends paid by Jones Company in 2010 no assets were disposed of during the year, and there was no change in interest payable or taxes payable.

December 2009 December 2010
Net Income $2,000 $4,000
Accounts 750 950
Accumulated depreciation 1,000 1,500
Common stock 4,500 5000
Paid-in capital 7,500 8500
Retained earnings 1,500 3,500
Accounts payable 750 750

Cash Dividend:

A company can issue two types of dividend namely the cash dividend and stock dividend. The cash dividend is the distribution of net income in the form of cash while the stock dividend means the distribution of shares to the shareholders in the proportion of their current holdings. A cash dividend is declared by the board of directors in the annual general meeting and it is paid within 30 days of the date of declaration and cannot be revoked once declared.

Answer and Explanation:


Answer:

The amount of dividends paid by Jones Company in 2010 is $2,000.

Explanation:

As per the data:

  • Beginning balance in retained earnings (2009) = $1,500
  • Ending balance in retained earnings (2010) = $3,500
  • Net income for 2010 = $4,000

Computation:

  • Ending retained earnings = Beginning balance in retained earnings + Net income of the period - Dividends paid
  • Dividends paid = $1,500 + $4,000 - $3,500
  • Dividends paid = $2,000

Learn more about this topic:

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Cash Dividends & Dividend Payment

from Finance 101: Principles of Finance

Chapter 16 / Lesson 1
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