Common stock dividends: are deducted before gross income equal the amount of res

Question

Common stock dividends: are deducted before gross income equal the amount of residual income of the firm are deducted after operating income are deducted from retained earnings Net income is $100,000 and common stock dividends paid are $100,000 for the year. Retained earnings were $500,00 at the beginning of the year. The end of year balance in retained earnings would be: Gross profit equals: Revenues - cost of goods sold - operating expenses Revenues - cost of goods sold - depreciation expense Revenues - cost of goods sold - interest expense Revenues - cost of goods sold

Explanation / Answer

The following formula can be used to write answers to all the given questions:

Revenues xxxx

(-) Cost of goods sold (xxxx)

= Gross Profit xxxx

(-) Operating Expenses (xxxx)

(-) Depreciation Expense (xxxx)

(-) Interest Expense (xxxx)

= Net Income (xxxx)

(-) Retained Earnings (xxxx)

= Common stock dividends (xxxx) This is residual income of the firm.

Answers to above questions are:

11) B.

12) D.

13) D

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