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In: Accounting

Shown below in T-account format are the changes affecting the retained earnings of Brenner-Jude Corporation during...

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 105 million common shares, $1 par per share.
  

Retained Earnings ($ in millions)
100 Beginning balance
Retirement of 5 million common shares for $29 million 3
84 Net income for the year
Declaration and payment of a $0.32 per share cash dividend 32
Declaration and distribution of a
6% stock dividend
28
121 Ending balance  


Required:
1. From the information provided by the account changes, you should be able to recreate the transactions that affected Brenner-Jude’s retained earnings during 2021. Prepare the journal entries that Brenner-Jude must have recorded during the year for these transactions. (Hint: In lieu of revenues and expenses, use an account titled “Income summary” to close net income or net loss.)
2. Prepare a statement of retained earnings for Brenner-Jude for the year ended 2021.

Solutions

Expert Solution

Answer
Journal entry related to retained earnings changes are given below
Date General Journal Debit Credit
Common stock (5 million shares*$1 par value) $        5,000,000
Paid in capital - excess of par (29000000-5000000-3000000) $      21,000,000
Retained earnings $        3,000,000
   Cash $      29,000,000
(To record common shares retired)
Date General Journal Debit Credit
Income summary $      84,000,000
   Retained earnings $      84,000,000
(To close income summary account)
Date General Journal Debit Credit
Retained earnings $      32,000,000
   Cash $      32,000,000
(To record cash dividend declared and paid)
Date General Journal Debit Credit
Retained earnings $      28,000,000
   Common stock ((105-5)*6%*$1 par value) $        6,000,000
   Paid in capital - excess of par (28 million - 6 million) $      22,000,000
(To record stock dividend declared and paid)
2
Retained earnings statement is provided below:
Statement of retained earnings
$ in million
Beginning balance, January 1 $                  100
Net income for the year $                    84
Less:
Retirement of common stock -$                      3
Cash dividend paid -$                    32
Stock dividend paid -$                    28
Retained earnings, December 31 $                  121

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