Net Income, Retained Earnings and Dividends
1. Income before income taxes
2. Income taxes expense
3. Net income
4. Earnings per share (EPS)
Net Income
1. Net income = Revenues – Expenses
2. What is the amount of net income in the following case?
Revenues = $500,000
Expenses = $340,000
Net income = Revenues – Expenses = $500,000 – $340,000 = $160,000
3. What is the amount of expenses in the following case?
Revenue = $810,000
Net income = $500,000
Net income = Revenues – Expenses = $810,000 – ?? = $500,000
?? = $810,000 – $500,000 = $310,000
4. What is the amount of revenues in the following case?
Expenses = $700,000
Net income = $350,000
Net income = Revenues – Expenses = ?? – $700,000 = $350,000
?? = $350,000 + $700,000 = $1,050,000
Retained Earnings
1. Beginning retained earnings + Net income – Dividends = Ending retained earnings
2. What is the amount of ending retained earnings in the following case?
Beginning retained earnings = $200,000
Net income = $150,000
Dividends = $60,000
Ending retained earnings
= Beginning retained earnings + Net income – Dividends
= $200,000 + $150,000 – $60,000 = $290,000
3. What is the amount of beginning retained earnings in the following case?
Ending retained earnings = $500,000
Net income = $270,000
Dividends = $120,000
Ending retained earnings
= Beginning retained earnings + Net income – Dividends
= ?? + $270,000 – $120,000 = $500,000
?? + $150,000 = $500,000
?? = $500,000 – $150,000 = $350,000
4. What is the amount of ending retained earnings in the following case?
Beginning retained earnings = $600,000
Revenues = $950,000
Expenses = $700,000
Dividends = $40,000
Ending retained earnings
= Beginning retained earnings + Net income – Dividends
= Beginning retained earnings + Revenues – Expenses – Dividends
= $600,000 + $950,000 – $ 700,000 – $40,000 = $810,000
Dividends
1. Beginning retained earnings + Net income – Dividends = Ending retained earnings
2. What is the amount of dividends in the following case?
Beginning retained earnings = $300,000
Ending retained earnings = $500,000
Net income = $290,000
Ending retained earnings
= Beginning retained earnings + Net income – Dividends
= $300,000 + $290,000 – ?? = $500,000
$590,000 – ?? = $500,000
?? = $590,000 – $500,000 = $90,000
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