Revenue for the year $15,000 Total expenses and tax for the year $10,000 Current

Question

Revenue for the year                       $15,000
Total expenses and tax for the year               $10,000
Current assets at year end                   $ 9,200
Non-current assets at year end               $12,750
Investment in fixed assets                   $      350
Common stock at the beginning of the year       $   2,000
Retained earnings at the beginning of the year       $   8,850
Total liabilities at year end                   $   9,400
What is the amount of dividend declared during the year?


2.   The company also has the following annual financial information
Beginning interest payable           $100,000
Cash paid for interest           $120,000
Ending interest payable           $110,000

What is the company’s interest expense during the year?

Explanation / Answer

1. Balance Sheet as at the end of the year:

Increase in retained earnings = $ 10,900 - $ 8,850 = $ 2,050

Net income for the year = Revenue less Expenses = $ 15,000 - $ 10,000 = $ 5,000

Therefore Dividends paid during the year = Net income for the year less earnings retained = $ 5,000 - $ 2,050 = $ 2,950

2. Interest expense during the year:

Beginning interest payable + Interest expense - Interest paid = Ending interest payable

Interest expense = $ 110,000 + 120,000 - 100,000 = $ 130,000

Assets $ Liabilities and equity $ Current assets 9,200 Total liabilities 9,400 Non current assets 12,750 Common stock 2,000 Fixed assets 350 Retained earnings( balancing amount) 10,900 Total assets 22,300 Total liabilities and equity 22,300

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