Question

MJ INC. paid out $44.8 million in total common dividend and reported $289.4 million of retained earnings at year-end. The prior year’s retained earnings were $191million. What was the net income ? Assume that all dividends declared and paid. Please show work

Answer 1

Given Dividend= 44.8 million, Reported retained year at year end = 289.4 million, Previous year retained earning = 191

Net income is also Profit after tax.i.e. Profit available to equity after all the deductions.

You need to know the below format to calculate the Net income:

Particulars	Amount
Net Income	xxx
Add: Retained Earning of Previous year	xxx
Total earning available to Equity shareholders	xxx
Less: Dividend Pay	xxx
Retained Earning at the year end	xxx

Now to calculate  Net Income you need to go in reverse direction.

So Total earning Available to Equity is = Retained earnig at year end + Dividen paid

= 289.4 + 44.8 = 334.2

Now Less Retained earning of previous year from Earning Available to equity ti reach Net income

= 334.2 - 191 = 143.3

So Net income is 143.3.