Question

Rittenhouse Orthopedics, a for-profit physician group, had an equity balance of $1.3 million at the beginning of 2019. At the end of 2019, its equity balance was $1.9 million

a. Assuming Rittenhouse did not pay out any dividends, what was its net income?

b. Assuming Rittenhouse paid out $200,000 in dividends, what was its net income?

c. Assuming Rittenhouse paid out $200,000 in dividends and sold $300,000 in common stock, what was its net income?

Answer 1

Part-a:

Net Income assuming Rittenhouse did not pay out any dividends:

Particulars	Amount($) - Million
Equity Balance at the end of 2019:	1.9
Less: Equity Balance at the beginning of 2019:	1.3
Net Income:	0.6

Part-b:

Net Income assuming Rittenhouse paid out $200,000 in dividends:

Particulars	Amount($) - Million
Equity Balance at the end of 2019:	1.9
Add: Dividend paid during the year:	0.2
Less: Equity Balance at the beginning of 2019:	1.3
Net Income:	0.8

Part-c:

Net Income assuming Rittenhouse paid out $200,000 in dividends and sold $300,000 in common stock:

Particulars	Amount($) - Million
Equity Balance at the end of 2019:	1.9
Add: Dividend paid during the year:	0.2
Add:Common Stock Sold:	0.3
Less: Equity Balance at the beginning of 2019:	1.3
Net Income:	1.1