A corporation was organized on January 1. At that time, 10,000 shares of common were sold and
Question:
A corporation was organized on January 1. At that time, 10,000 shares of common were sold and issued at $10.00 per share cash. $20,000 of the proceeds was used to purchase equipment. The corporation had promised to pay $2.00 per share in dividends during the year if income exceeded $40,000. As it turned out, income was $60,000 however, due to a severe cash shortage the corporation declared a scrip dividend (resulting in a current liability) rather than an immediate cash dividend.
If no other transaction occurred which would affect retained earnings, the corporation should report on December 31, retained earnings of:
Multiple Choice
$20,000
$160,000
$60,000
$40,000
Intermediate Accounting
ISBN: 978-0324592375
17th Edition
Authors: James D. Stice, Earl K. Stice, Fred Skousen