Question

Item Prior year Current year Accounts payable 8,146.00 7,767.00 Accounts receivable 6,023.00 6,615.00 Accruals 964.00 1,504.0

What is the firm's dividend payment in the current year?

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Answer #1

Solution : Income statement for the current year

Sales revenue.     46,117

Less : Cost of goods sold. 18,048

-------------------

Gross margin . 28,069

Less : Operating exp.(excl dep) 18,172

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EBDIT. 9,897

Less : Depreciation. 2,806

   ---------------

EBIT. 7,091

Less : Interest Exp. 4,17

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EBT. 6,674

Less: Taxes. 2,775

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Net Income. 3,899

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Calculation for dividend payment of current year :-

1). Calculate the net change in retained earnings by subtracting the current year retained earning figure from the last year retained earning.

Difference = 29,828 - 28,678 = 1,150

2) If the net change in retained earnings is less than the net income ,the difference is the amount of dividend paid out during the period.

So, Net income    = 3,899

Less : Net change in retained earnings = 1,150

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2,749

So, 2,749 must have been paid out to investors as a dividend.

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