On its 12/31/11 balance sheet, Barnes Inc showed $510 million of retained earnin

Question

On its 12/31/11 balance sheet, Barnes Inc showed $510 million of retained earnings, and exactly that same amount was shown the following year. Assuming that no earnings restatements were issued, which of the following statements is CORRECT?

a. The company must have had zero net income in 2011.
b. The company must have paid no dividends in 2011.
c. If the company lost money in 2011, it must have paid dividends.
d. Dividends could have been paid in 2011, but they would have had to equal the earnings for the year.
e. The company must have paid out half of its 2011 earnings as dividends.

Explanation / Answer

d. Dividends could have been paid in 2011, but they would have had to equal the earnings for the year.

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