Question

Shown below in T-account format are the changes affecting the retained earnings of Brenner-Jude Corporation during 2021. At January 1, 2021, the corporation had outstanding 94.00 million common shares, $3.0 par per share.

Retained Earnings ($ in millions)
		78	Beginning balance
Retirement of 4.0 million common shares for $23.0 million	2.50
		69	Net income for the year
Declaration and payment of a $0.25 per share cash dividend	22.50
Declaration and distribution of a 4% stock dividend	24.80
		97.20	Ending balance

Required:
1. Prepare the journal entries to record the transactions that affected Brenner-Jude's retained earnings during 2021 based on the information provided.
2. Prepare a statement of retained earnings for Brenner-Jude for the year ended 2021.

Answer 1

Date / S.No.	Account Titles and Explanations	Debit (in $millions)	Credit (in $millions)
1	Common stock	$ 4
	Retained earnings	$ 2.50
	Paid in Capital-Excess of par   - Bal. Fig.	$ 16.50
	Cash		$ 23
	(To record the retirement of common shares )
2	Income Summary	$ 69
	Retained Earnings		$ 69
	(To record the closing entry for net income )
3	Retained Earnings	$ 22.50
	Cash		$ 22.50
	(To record the declaration and payment of a cash dividend )
4	Retained Earnings	$ 23
	Common stock                  ( $ 94 (-) $ 4) x 4% x $ 1		$ 3.60
	Paid in Capital-Excess of par		$ 19.40
	(To record the declaration and distribution of a stock dividend.)

Brenner-Jude Corporation Statement of Retained Earnings
Balance at January 1 ( $ 94 (-) $ 4)	$ 90
Net income for the year	$ 69
Less:
Retirement of Common Stock	($ 2.50)
Cash dividends	($ 22.50)
Stock dividends	($ 23)
Statement of Retained Earnings Balance at December 31	$ 111