Question

King burger reported shareholder equity on march 31st, 2019 of $4,500,000 and on march 31st, 2020...

King burger reported shareholder equity on march 31st, 2019 of $4,500,000 and on march 31st, 2020 of $4, 655,310. additionally, net income for the yaer-ending march 31st, 2020 is $243, 300. the firm paid out 30 percent of the net income to its shareholders as dividends and aslo paid $6,300 in interest. what is the cash flow to shareholders? (hint; do not forget dividends and retained earnings)

a- $57,990

b- $155,310

c- $86,790

d- $72, 990

e- $87, 990

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Answer #1

Opening equity = $4500000

Closing Equity = $4655310

Difference in Equity = 4655310 - 4500000

= $155310

Net Income = 243300

Dividend Pay out = 30% * 243300

= $72990

Reatined earnings = 243300 - 72990

= $170310

Closing equity = Beginning equity + Retained earnings

= 4500000 + 170310

= $4670310

So, The difference in Closing Equity = 4670310 - 4655310

= $15000

Cash flow to equity = Dividend + Difference in closing equity

= 72990+ 15000

= $87990

Option E is the correct answer

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