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Susan and Rodney have been having a heated debate about dividends. Susan states she learned in her first accounting course that dividends are paid out of net income. Rodney argues she is mistaken. He says dividends are paid out of earnings and profits. Analyze who is correct in the above scenario, Susan or Rodney, and explain why.
Analyze and discuss the following questions:
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Explain Why would income statement results prepared and reported externally, following GAAP absorption costing, differ from income reported internally
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