Question

Q1: On January 1, 2017, Richard Industries Ltd. had retained earnings of £550,000.
During the year, Richard had the following selected transactions.
1. Declared cash dividends £96,000.
2. Corrected overstatement of 2016 net income because of depreciation error £31,000.
3. Earned net income £350,000.
4. Declared share dividends £62,000
Instructions
Prepare a retained earnings statement for the year

Q2: Bindra Company A.S¸. reported retained earnings at December 31, 2016, of ₺340,000.Bindra had 200,000 ordinary shares outstanding at January 1, 2017.The following transactions occurred during 2017.
1. An error was discovered: in 2015, depreciation expense was recorded at ₺66,000, butthe correct amount was ₺50,000
2. A cash dividend of ₺0.50 per share was declared and paid.
3. A 5% share dividend was declared and distributed when the market price per share was ₺14 per share.
4. Net income was ₺285,000
Instructions
Prepare a retained earnings statement for 2017

Q3: On January 1, 2017, the equity section of Bergin ASA shows share capital—ordinary(£5 par value) £1,500,000; share premium—ordinary £1,000,000; and retained earnings£1,200,000. During the year, the following treasury share transactions occurred.
Mar. 1 Purchased 50,000 shares for cash at £12 per share.
July 1 Sold 10,000 treasury shares for cash at £14 per share.
Sept. 1 Sold 8,000 treasury shares for cash at £10 per share.
Instructions
(a) Journalize the treasury share transactions.
(b) Restate the entry for September 1, assuming the treasury shares were sold at £9 per share

Answer 1

Answer :-

1)

RICHARD Industries Ltd.
Retained Earnings Statement
For the Year Ended December 31, 2017
Retained Earnings Jan 1 (beginning balance)		$550,000
Net Income earned for the year		$350,000
Total		$900,000
Less: Correct Overstatement of 2016 Net Income		$31,000
		$869,000
Less:
Cash Dividend Declared and paid	$96,000
Stock Dividends declared and paid	$62,000
		$158,000
Retained Earnings Dec 31, 2017		$711,000

2)

Bindra COMPANY                          Retained Earnings Statements                     For the year ended December 31, 2017

Balance, January 1, as reported		$340,000
Corrections for understatement of 2015 Net Income ($66,000 - $50,000)		$16,000
Balance, January 1, as adjusted		$356,000
Add: Net income		$285,000
		$641,000
Less:
Cash Dividends (Working Note)	$100,000
Stock Dividends (200,000 * $14 * 5%)	$140,000
		($240,000)
Balance, December 31		$501,000

Working Note:-

Calculation of Cash dividends

Number of shares outstanding * Dividend per share

= $200,000 * 0.50 = $100,000

3)

a)

Date	Account Tittle	Debit $	Credit $
Mar-01	Treasury stock	600,000
	Cash (50,000 shares x $ 12)		600,000
Jul-01	Cash (10,000 x $ 14)	140,000
	Treasury stock ($10,000 * $12)		120,000
	Paid-in capital from treasury stock($10,000 * $2)		20,000
Sep-01	Cash ($8,000 * $10)	$80,000
	Paid in capital from treasury stock($8,000 * $2)	$16,000
	Treasury Stock($8,000*$12)		$96,000

b)

Account Title	Debit	Credit
Cash	$72,000
Paid in capital from treasury stock	$20,000
Retained earnings	$4,000
Treasury stock		$96,000

Working Note :-

Cash = $8,000 * $9 = $72,000

Treasury stock = $8,000 * $12 = $96,000