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2 December, 22:36

In its most recent financial statements, Del-Castillo Inc. reported $30 million of net income and $970 million of retained earnings. The previous retained earnings were $961 million. How much in dividends did the firm pay to shareholders during the year?

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  1. 2 December, 22:42
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    the firm pay 39 millions dividends to his shareholders during the year.

    Explanation:

    The retained earnings identity is as follow:

    beginning RE + net income - dividends = ending RE

    we plug our values into the formula:

    970 + 30 - dividends = 961

    we clear dividends:

    970 + 30 - 961 = dividends

    And solve:

    dividends = 39

    Notes:

    For every account, we always have this similar identity:

    a beginning balance

    a type of transaction that increase their balance

    another kind of transaction which decreased

    and a final balance which is the net of the previous.

    beginning + increase - decrease = ending

    Always try to identify how each transaction impact the account and from there, setup the equation.
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