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Longhorn Corp: Net Income Distribution & Retained Earnings Explained
Chapter 21, Problem 2(choose chapter or problem)
Distributing Corporate Earnings
During its first year of operation, Longhorn Corporation issued 17,500 shares of $10 par common stock. At the end of the year, the corporation had a net income of $350,000. The board of directors declared a cash dividend of $5 per share.
Instructions Answer these questions in your working papers.
1.) How much of the net income did Longhorn distribute to the stockholders?
2.) How much of the net income did the corporation retain?
Questions & Answers
QUESTION:
Distributing Corporate Earnings
During its first year of operation, Longhorn Corporation issued 17,500 shares of $10 par common stock. At the end of the year, the corporation had a net income of $350,000. The board of directors declared a cash dividend of $5 per share.
Instructions Answer these questions in your working papers.
1.) How much of the net income did Longhorn distribute to the stockholders?
2.) How much of the net income did the corporation retain?
ANSWER:
Step 1 of 2
Net income is described as the net earnings left with the corporation after the payment of expenses in order to generate revenues. The net income earned by the corporation is added to the retained earnings.
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Longhorn Corp: Net Income Distribution & Retained Earnings Explained
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Explore the financial decisions of Longhorn Corporation in its debut year. Understand how net income distribution affects stockholders and the significance of retained earnings in maintaining company growth.