Question

StraightSteel, Inc. started the year with a balance of retained earnings of $12.9million and ended the year with retained earnings of $14.2million. The company paid dividends of $300,000to the preferred stock holders and $1,750,000to common stock holders. What was the firm’snet income for the year?A.more than $3,360,000B.less than $3,360,000 but more than $3,175,000C.less than $3,175,000but more than $2,980,000D.less than $2,980,000 but more than $2,795,000E.less than $2,795,000

Answer 1

Ans.	Option B    less than $3,360,000 but more than $3,175,000
	*Calculations and explanations:
	Ending retained earnings	$14,200,000
	Add: Dividends to preference shareholders	$300,000
	Add: Dividends to common stockholders	$1,750,000
	Less: Beginning retained earnings	-$12,900,000
	Net income	$3,350,000
	*Net income can be calculated by adding the ending retained earnings and total dividends and then
	beginning balance of retained earnings is subracted from this addition.