# The ABC Co. has its sales of $264,200, costs of$185,600, and interest paid of $11,200. The... ## Question: The ABC Co. has sales of {eq}\$264,200 {/eq}, costs of {eq}\$185,600 {/eq}, and interest paid of {eq}\$11,200 {/eq}. The depreciation expense is {eq}\$36,900 {/eq} and the tax rate is {eq}34 \% {/eq}. At the beginning of the year, the firm had retained earnings of {eq}\$171,500 {/eq} and common stock of {eq}\$300,000 {/eq}. At the end of the year, the firm has retained earnings of {eq}\$164,700 {/eq} and common stock of {eq}\$350,000 {/eq}. What is the amount of the dividends paid for the year? ## Dividends paid: Dividends refer to the amount paid to the stockholders of the company against a sum of money invested by them in the company. It is paid from the income after payment of all interests and taxes. ## Answer and Explanation: Let us first prepare a short income statement for the company: Particulars Amount Sales 264,200.00 Less: Costs 185,600.00 Less: Depreciation 36,900.00 Less: Interest paid 11,200.00 Earnings before tax 30,500.00 Less: Tax @ 34% 10,370.00 Net Income 20,130.00 Now, Addition to retained earnings = Closing balance of retained earnings - Opening balance of retained earnings =$164,700.00 - $171,500.00 = -$6,800.00

Dividend paid for the year
= Net Income - Addition to retained earnings
= $20,130.00 - (-$6,800.00)
= \$26,930.00 