- CFA Exams
- CFA Level I Exam
- Topic 5. Equity Investments
- Learning Module 8. Equity Valuation: Concepts and Basic Tools
- Subject 3. Present Value Models: The Dividend Discount Model
CFA Practice Question
Last year, Flower Buds had equity accounts as follows:
Retained Earnings: $12,000
Total Shareholder's Equity: $72,000
Projected income is $72,000 and a $0.50 dividend per share is to be paid immediately.
B. $54,000
C. $114,000
Common Stock ($1 Par Value): $60,000
Retained Earnings: $12,000
Total Shareholder's Equity: $72,000
Projected income is $72,000 and a $0.50 dividend per share is to be paid immediately.
What will be the ending retained earnings account?
A. $42,000
B. $54,000
C. $114,000
Correct Answer: B
RE1 = RE-1 + RE0 = 12,000 + 42,000 = 54,000
RE0 = NI - DIV = 72,000 - .5(60,000) = 42,000
RE1 = RE-1 + RE0 = 12,000 + 42,000 = 54,000
User Contributed Comments 2
| User | Comment |
|---|---|
| Indira | Ending RE = Beg RE + NI - DIV 12,000+72,000-0.5(60,000)=54,000 |
| Inaganti6 | Now only if the real exam had questions this easy. |