You are given the following information for Company ABC as of December 31, 2016:

Question

You are given the following information for Company ABC as of December 31, 2016:

Capital Stock, $1,000,000 ($1 par)

Paid-In Capital in Excess of Par Value—Common, $4,000,000

Retained Earnings Balance on January 1, 2016, $400,000

Retained Earnings Balance on December 31, 2016, $300,000

Dividends declared and paid in 2016: $1,100,000

What was the company's net income for 2016?

Select one:

a. $1,200,000

b. $100,000

c. $0

d. None of the above

How many shares of stock are issued and outstanding?

Select one:

a. 4,000,000

b. 5,000,000

c. 1,000,000

d. None of the above

Explanation / Answer

Ans. Company Net Income for 2016: Particulars Amt.($) Retained Earning balance on December 31, 2016                  300,000 Add: Dividend Paid in 2016               1,100,000               1,400,000 Less: Retained Earning balance on January 1, 2016                  400,000                          Net Income $          1,000,000 d) None of the above. Ans. Shares of Stock Issued and Outstanding: No. of Shares = Value of Stock / Par value = $1,000,000 / $1 = 1,000,000

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