On its 2007 balance sheet, a firm showed $100 million of retained earnings, and

Question

On its 2007 balance sheet, a firm showed $100 million of retained earnings, and exactly that same amount was shown the following year. Assuming that no earnings restatements were issued, which of the following statements is CORRECT?

answers

a. The company must have paid no dividends in 2007.
b. Dividends could have been paid in 2007, but they would have had to equal the earnings for the year.
c. The company must have had zero net income in 2007.
d. If the company lost money in 2007, they must have paid dividends.
e. The company must have paid out half of its earnings as dividends.

Explanation / Answer

b. Dividends could have been paid in 2007, but they would have had to equal the earnings for the year.

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