ACCT 121 Lecture Notes - Lecture 2: Retained Earnings

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9 May 2020

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Stockholders" equity: there are five subdivisions of stockholders" equity: common stock, retained earnings, dividends, revenues, and expenses. In a double-entry system, companies keep accounts for each of these subdivisions, as explained below. Common stock: companies issue common stock in exchange for the owners" investment paid in to the corporation. Credits increase the common stock account, and debits decrease it: for example, when an owner invests cash in the business in exchange for shares of the corporation"s stock, the company debits (increases) cash and credits (increases) Retained earnings: retained earnings is net income that is kept (retained) in the business. It represents the portion of stockholders" equity that the company has accumulated through the profitable operation of the business: credits (net income) increase the retained earnings account, and debits (dividends or net losses) decrease it. Dividends: a dividend is a company"s distribution to its stockholders on a pro rata (equal) basis.

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	Adjusted Trial Balance
	For the Month Ended June 30, 2014
		Adjusted Trial Balance
	Account Titles	Debits	Credits
	Cash	3.712
	Accounts Receivable	3.904
	Supplies	480		(b)
	Accounts Payable		1.556	Net Income:
	Unearned Service Revenue		160
	Common Stock		4.000
	Retained Earnings		1.760
	Dividends	600
	Service Revenue		4.300
	Salaries and Wages Expense	1.344		Retained earnings:
	Miscellaneous Expense	180
	Supplies Expense	1.900
	Salaries and Wages Payable		344
		12.120	12.120
	Instructions
(a)	Prepare a classified balance sheet at June 30, 2014.
(b)	Hint: find net income and update retained earnings

scarletmallard658

1) During 2015, Gardner Home Center sold 800 power washers for$350 each. The power

washers carry a 2-year warranty for repairs. Estimates indicatethat repair costs will average 2% of sales. How much warrantyexpense should be accrued as a result of the 2015 sales of thisproduct?

Select one:

a. $0

b. $2,800

c. $8,400

d. $5,600

Front Corporation issues its bonds at a premium. Amortization ofthe premium will

Select one:

a. decrease the carrying value of the bonds on the balancesheet.

b. be reported as a loss on the income statement.

c. increase bond interest expense.

d. decrease bond interest expense.

A corporation reported net income of $60,000, declared and paidcash dividends of $80,000,

andissued 3,000 shares of $2 par common stock at $15 per share duringthe year. What total effects would these transactions have on thefollowing stockholders' equity accounts?

Select one:

a. decrease retained earnings and increase common stock

b. decrease retained earnings and decrease common stock

c. increase retained earnings and decrease common stock

d. increase retained earnings and increase common stock

Barr Motors, Inc. issued 50,000 shares of $1 par common stockand 10,000 shares of 4%, $5 par cumulative, preferred stock at thebeginning of 2008. Barr did not pay any cash dividend for the years2012, 2013 and 2014.On December 31, 2015, the company paid a totaldividend of $10,000. How much of this dividend went to the commonshareholders?

Select one:

a. $2,000

b. $8,000

c. $4,000

d. $10,000

The statement of stockholders' equity shows an $8,000 increasein the common stock account, a $22,000 increase in the paid-incapital in excess of par--common stock account, and a $100,000increase in retained earnings. If the common stock has a par valueof $3 and dividends of $10,000 were declared and paid during theyear, what is the amount of net income for the year?

Select one:

a. $110,000

b. $100,000

c. $140,000

d. $90,000

In a common size balance sheet, the 100 percent figure is

Select one:

a. total liabilities.

b. total current assets.

c. total assets

d. total property, plant and equipment.

byzantiumleopard24

1. The effect of a stock dividend is to

Question 17 options:

change the composition of stockholders' equity.

increase the book value per share of common stock.

decrease total assets and stockholders' equity.

decrease total assets and total liabilities

2. Regular dividends are declared out of:

	Common Stock.
	Treasury Stock.
	Retained Earnings.
	Paid-in Capital in Excess of Par.

3. Solaris, Inc. has 2,000 shares of 5%, $10 par value,cumulative preferred stock and 50,000 shares of $1 par value commonstock outstanding at December 31, 2014. What is the annual dividendon the preferred stock?

Question 20 options:

$5 per share

$10,000 in total

$1,000 in total

$.05 per share

4. Corporations generally issue stock dividends in order to

Question 21 options:

decrease the amount of capital in the corporation.

increase the market price per share.

exceed stockholders' dividend expectations.

increase the marketability of the stock.

5. A stockholder who receives a stock dividend would

Question 22 options:

expect the par value of the stock to change.

own more shares of stock.

expect retained earnings to increase.

expect the market price per share to increase.

6. When stock dividends are distributed,

Question 23 options:

	Retained Earnings is decreased.
	Common Stock Dividends Distributable is decreased.
	no entry is necessary if it is a large stock dividend.
	Paid-in Capital in Excess of Par is debited if it is a smallstock dividend.

Identify the effect the declaration and distribution of a stockdividend has on the par value per share.

Question 24 options:

No effect

Increase or decrease

Increase

Decrease

A stock split

Question 25 options:

will have no effect on the par value per share of stock.

will increase the total par value of the stock.

will increase total paid-in capital.

may occur in the absence of retained earnings.

On January 1, Sly Corporation had 120,000 shares of $10 parvalue common stock outstanding. On March 17, the company declared a15% stock dividend to stockholders of record on March 20. Marketvalue of the stock was $13 on March 17. The entry to record thetransaction of March 17 would include a

Question 26 options:

debit to Common Stock Dividends Distributable for $180,000.

credit to Cash for $234,000.

credit to Stock Dividends for $54,000.

credit to Common Stock Dividends Distributable for $180,000.

Bento, Inc. had 500,000 shares of common stock outstandingbefore a stock split occurred, and 1,500,000 shares outstandingafter the stock split. The stock split was

Question 27 options:

1-for-5.

2-for-5.

5-for-1.

3-for-1.

In the stockholders' equity section of the balance sheet,

Question 28 options:

Dividends in arrears will appear as a restriction of RetainedEarnings.

Common Stock Dividends Distributable will appear in its ownsubsection of the stock- holders' equity.

Common Stock Dividends Distributable will be classified as partof additional paid-in capital.

Additional Paid-in Capital appears under the subsection Paid-inCapital.

During 2014 Miami Inc. had sales revenue $1,328,000, grossprofit $728,000, operating expenses $398,000, cash dividends$90,000, other expenses and losses $40,000. Its corporate tax rateis 30%. What was Miami's income tax expense for the year?

Question 29 options:

$87,000

$398,400

$180,000

$60,000

Paiva Corporation splits its common stock 2 for 1, when themarket value is $80 per share. Prior to the split, Paiva had100,000 shares of $10 par value common stock issued andoutstanding. After the split, the par value of the stock

Question 30 options:

	remains the same.
	is reduced to $5 per share.
	is reduced to $2 per share.
	is reduced to $20 per share.

periwinklejellyfish203

ACCT 121 Lecture Notes - Lecture 2: Retained Earnings

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