Question

Retained Earnings Accounts and Statement

1. Prepare journal entries for the transactions.

If an amount box does not require an entry, leave it blank.

2. Post all entries affecting the retained earnings accounts to T accounts.

3. Prepare a statement of retained earnings for the year ended December 31, 20--.

On January 1, 20--, Glover Company's retained earnings accounts had the following balances:

Appropriated for land acquisition	$	52,000
Unappropriated retained earnings		903,000
	$	955,000

During the year ended December 31, 20--, Glover completed the following selected transactions:

Mar. 20	Declared a semiannual dividend of $0.7 per share on preferred stock and $0.2 per share on common stock to shareholders of record on April 10, payable on April 15. Currently, 10,000 shares of $50 par preferred stock and 100,000 shares of $5 par common stock are outstanding.
Apr. 15	Paid the cash dividends.
Oct. 10	Declared semiannual dividend of $0.7 per share on preferred stock and $0.2 per share on common stock to shareholders of record on November 5, payable on November 10.
Nov. 10	Paid the cash dividends.
17	Declared a 5% stock dividend to shareholders of record on December 8, distributable on December 15. Market value of the common stock was estimated at $17 per share.
Dec. 15	Issued certificates for common stock dividend.
31	Net income for 20-- was $300,000. Closed the income summary account.
31	Closed the cash dividends and stock dividends accounts.1. Prepare journal entries for the transactions. If an amount box does not require an entry, leave it blank. GENERAL JOURNAL PAGE 1 DATE DESCRIPTION POST. REF. DEBIT CREDIT 20-- Mar. 20 Apr. 15 Oct. 10 Nov. 10 Nov. 17 Dec. 15       Dec. 31       Dec. 31 2. Post all entries affecting the retained earnings accounts to T accounts. Retained Earnings—Appropriated for Land Acquisition Bal. Retained Earnings—Unappropriated Bal. Bal. 3. Prepare a statement of retained earnings for the year ended December 31, 20--. Glover Company Statement of Retained Earnings For Year Ended December 31, 20-- Appropriated: $ Unappropriated: $ $ $ Total retained earnings, December 31 $

Answer 1

Retained Earnings Accounts and Statement

Opening balances in retained earnings

Appropriated for land acquisition $52,000

Unappropriated retained earnings $903,000

20 March

Retained Earnings A/c Dr. 27,000

To Provision for dividend on common stock (100,000 shares X $0.2 per share) 20,000

To Provision for preference stock (10,000 shares X $0.70) 7,000

(Being provision has been made by the Company on declaraed dividend)

15 April

Provision for dividend on common stock A/c Dr. 20,000

Provision for preference stock A/c Dr. 7,000

To Cash/Bank 27,000

(Being amount paid as dividend)

10 October

Retained Earnings A/c Dr. 27,000

To Provision for dividend on common stock (100,000 shares X $0.2 per share) 20,000

To Provision for preference stock (10,000 shares X $0.70) 7,000

(Being provision has been made by the Company on declaraed dividend)

10 November

Provision for dividend on common stock A/c Dr. 20,000

Provision for preference stock A/c Dr. 7,000

To Cash/Bank 27,000

(Being amount paid as dividend)

17 November

Retained Earnings A/c Dr. 25,000

To Provision for dividend on common stock (100,000 shares X $5 X 5%) 25,000

(Being provision has been made by the Company on declaraed dividend)

31 December

Statement of profit or loss A/c Dr. 300,000

To retained earnings 300,000

Provision for dividend on common stock at stand at year end balance sheet since payment not made.

Schedule of retained earnings

Opening balance of Appropriated for land acquision $52,000

Add-: Changes during the year Nil

Closing balance of Appropriated for land acquision $52,000

Opening balance of Appropriated for retained earnings $ 903,000

Less- Dividend paid during the year ($79,000)

(27,000 + 27,000 + 25,000)

Add-: Net profit for the year $300,000

Closing balance of retained earnings $1,124,000

Retained earnings -General ledger

Debit Credit

Opening balance 903,000

Dividend 27,000

Dividend 25,000

Dividend 25,000

Net Profit 300,000

Closing Balance 1,124,000