Question

the ending retained earnings balance of carriage, incorporated decreased by $1.7 million from the beginning of the year. the company declared dividends of $6.0 million during the year. what was the net income for the year? multiple choice $4.3 million $6.0 million $1.7 million $7.7 million

Explanation:

Step1: Recall the retained - earnings formula

The formula for change in retained earnings is $\text{Change in Retained Earnings}=\text{Net Income}-\text{Dividends}$. We know that the ending retained - earnings balance decreased by $\$1.7$ million, so $\text{Change in Retained Earnings}=- 1.7$ million. The company declared dividends of $\$6.0$ million, so $\text{Dividends}=6.0$ million.

Step2: Rearrange the formula to solve for net income

From $\text{Change in Retained Earnings}=\text{Net Income}-\text{Dividends}$, we can solve for $\text{Net Income}$: $\text{Net Income}=\text{Change in Retained Earnings}+\text{Dividends}$.

Step3: Substitute the known values

Substitute $\text{Change in Retained Earnings}=-1.7$ million and $\text{Dividends}=6.0$ million into the formula: $\text{Net Income}=-1.7 + 6.0$.

Step4: Calculate the net income

$-1.7+6.0 = 4.3$ million.

Answer:

$\$4.3$ million