Recording cash dividends, stock dividends, and appropriation of retained earnings; preparing statement of retained earnings. LO 21-5,
Question:
Recording cash dividends, stock dividends, and appropriation of retained earnings; preparing statement of retained earnings. LO 21-5, 21-6, 21-8, 21-11
The stockholders' equity accounts of Jacob Corporation on January 1, 2019, contained the following balances:
| Preferred Stock (10%, $100 par value, 4,000 shares authorized) | ||||||
| Issued and Outstanding, 1,500 Shares | $ | 150,000 | ||||
| Paid-in Capital in Excess of Par Value—Preferred | 1,500 | $ | 151,500 | |||
| Common Stock ($20 par value, 30,000 shares authorized) | ||||||
| Issued and Outstanding, 20,000 Shares | 400,000 | |||||
| Retained Earnings | 395,500 | |||||
| Total Stockholders’ Equity | $ | 947,000 | ||||
| DATE | TRANSACTIONS | ||
| June | 15 | Declared a semiannual dividend of 5 percent on preferred stock, payable on July 15 to stockholders of record on June 30. | |
| July | 15 | Paid the dividend on preferred stock. | |
| Dec. | 15 | Declared a semiannual dividend of 5 percent on preferred stock, payable on January 15, 2020, to stockholders of record on December 31, 2019, and a cash dividend of $2.00 per share on common stock, payable on January 15, 2020, to stockholders of record on December 31, 2019. Make separate entries. | |
| 15 | Declared a 10 percent common stock dividend to common stockholders of record on December 31, 2019. The new shares are to be issued on January 15, 2020. A fair value price of $25 per share is expected for the new shares of common stock. | ||
| Dec. | 31 | Created an “appropriation of retained earnings for contingencies” of $50,000 because of the poor economic outlook. | |
| 31 | The Income Summary account contained a debit balance of $25,000. The board had anticipated a net loss for the year and no quarterly deposits of estimated income taxes were made, so income taxes may be ignored. | ||
Required:
1. & 2. Record the above transactions in the general journal for 2019 and Post them to the Retained Earnings account (381) and record the January 1, 2019, balance.
Prepare a statement of retained earnings for the year 2019.
Analyze:
If Jacob Corporation had not declared cash or stock dividends for common stockholders, what balance would be found in the unappropriated Retained Earnings account at December 31, 2019?
Expert Answer:
solution Date Account Title Debit Credit 15Jun Retained Earnings 7500 Preference dividends payable 7... View the full answer
