Thelma and Louie, Inc. started the year with a balance of retained earnings of $542 million and ended the year with retained earnings of $584 million. The company paid dividends of $32 million to the preferred stockholders and $72 million to common stockholders. Calculate Thelma and Louie’s net income for the year.

Thelma and Louie’s net income for the year is $146 Million

Explanation:

Retained Earning account accumulates all the earning made by business and payment of dividend also made from this account. The net Income for the year is added to this account.

Use following formula to calculate the Net Income for the year.

Closing Balance of retained earning = Opening Balance of retained earning + Net income  for the year - Dividend paid during the year

$584 million = $542 million + net Income - ( 32 million + 72 million )

$584 million = $542 million + net Income - 104 million

$584 million = $438 million + net Income

Net Income = $584 million - $438 million  = $146 million

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