A is corrent. Retained earnings increased $115,000 ($280,000 – $165,000) even though net income was $200,000 for year 2 . This indicates that dividends declared during this period amounted to $85,000 ($200,000 – $115,000). However, $35,000 of this represents a liability at the end of year 2 . Therefore, cash dividend payments for year 2 is $50,000 ($85,000 – $35,000).
B is incorrect. Retained earnings increased $115,000 ($280,000 – $165,000) even though net income was $200,000 for year 2 . This indicates that dividends declared during this period amounted to $85,000 ($200,000 – $115,000). However, $35,000 of this represents a liability at the end of year 2 . Therefore, cash dividend payments for year 2 is $50,000 ($85,000 – $35,000).
C is incorrect. Retained earnings increased $115,000 ($280,000 – $165,000) even though net income was $200,000 for year 2 . This indicates that dividends declared during this period amounted to $85,000 ($200,000 – $115,000). However, $35,000 of this represents a liability at the end of year 2 . Therefore, cash dividend payments for year 2 is $50,000 ($85,000 – $35,000).
D is incorrect. Retained earnings increased $115,000 ($280,000 – $165,000) even though net income was $200,000 for year 2 . This indicates that dividends declared during this period amounted to $85,000 ($200,000 – $115,000). However, $35,000 of this represents a liability at the end of year 2 . Therefore, cash dividend payments for year 2 is $50,000 ($85,000 – $35,000).
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