The board of directors of Metropolitan Manufacturing Company voted to pay the holders of preferred and common shares cash dividends amounting to $46,000. Such dividends are traditionally but not necessarily voted on and disbursed on a quarterly basis.
Notice that Retained Earnings on the balance sheet (line 21) was affected by two activities, net income and cash dividends, as follows:
Retained Earnings, 12/31/01 $1,247,000
Plus: Net Income, 2002 $156,000
Minus: Cash Dividends, 2002 - 46,000
Equals: Change in Retained Earnings, 2002 $110,000
Retained Earnings, 12/31/2002 $1,357,000
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