Avatar Company Uses the Indirect Method to Prepare Its Statement

question 85

Multiple Choice

Avatar Company uses the indirect method to prepare its statement of cash flows. Please refer to the following portion of the comparative balance sheet:
$$\begin{array} { | l | r | r | r | } \hline&2014 & 2013 & \text { Increase/decrease }\\\hline \text { Common stock } & \$ 30,000 & \$ 2,000 & \$ 28,000 \\\hline \text { Retained earnings } & 113,000 & 74,000 & 39,000 \\\hline \text { Treasury stock } & ( 8,000 & ( 5,000 ) & ( 3,000 ) \\\hline \text { Total equity } & \$ 135,000 & \$ 71,000 & \$ 64,000 \\\hline\end{array}$$

Note: Net income for the year was $49,000.
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Based on the above, how much was paid out in dividends?

• A) $28,000
• B) $39,000
• C) $3,000
• D) $10,000

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Definitions:

Chapter 11

A provision of the United States Bankruptcy Code that permits reorganization under the bankruptcy laws of the United States.

Debtor's Assets

The property or funds owned by a debtor that may be used or taken to repay debts.

Repayment-plan Bankruptcy

A bankruptcy procedure that involves restructuring a debtor's payment obligations to pay off debts over time, under court supervision.

U.S. Trustee

A government official who performs administrative tasks that a bankruptcy judge would otherwise have to perform.