Use the following information to answer this question. Windswept, Inc. 2017 Income Statement ($ in millions) Net sales $ 9,200 Cost of goods sold 7,390 Depreciation 305 Earnings before interest and taxes $ 1,505 Interest paid 87 Taxable income $ 1,418 Taxes 425 Net income $ 993 Windswept, Inc. 2016 and 2017 Balance Sheets ($ in millions) 2016 2017 2016 2017 Cash $ 240 $ 255 Accounts payable $ 1,380 $ 1,315 Accounts rec. 1,020 730 Long-term debt 1,130 1,400 Inventory 1,620 1,640 Common stock 3,280 3,010 Total $ 2,880 $ 2,625 Retained earnings 460 710 Net fixed assets 3,370 3,810 Total assets $ 6,250 $ 6,435 Total liab. & equity $ 6,250 $ 6,435 What were the total dividends paid for 2017?

$743

Explanation:

The accounting equation shows the relationship between the elements of a balance sheet which are assets liabilities and equity. This may be expressed mathematically as

Assets = Liabilities + Equity

While assets include fixed assets, cash, inventories, account receivables etc, liabilities include accounts payable, loans payable, accrued expenses etc.

Equity which represents the amount owed to the owners of the business includes retained earnings (which is the accumulation of the net income/loss over the years less dividends paid) and common shares.

Given ;

2017 net income = $993

Difference in retained earning between 2016 and 2017

= $710 - $460

= $250

This change is as a result of the dividend paid and the net income for 2017 hence,

$250 = $993 - Dividend paid

Dividend paid = $993 - $250

= $743

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