1. Question 3

a. Alliance Corp. issues 1,950 shares of $11 par value common stock at $18 per share. When the transaction is recorded, what credit entry or entries are made?

Select the correct answer:

1. Common Stock $13,650 and Retained Earnings $21,450.
2. Common Stock $21,450 and Paid-in Capital in Excess of Stated Value $13,650.
3. Common Stock $35,100.
4. Common Stock $21,450 and Paid-in Capital in Excess of Par Value $13,650.

b. The Dayton Corporation began the current year with a retained earnings balance of $19,363. During the year, the company corrected an error made in the prior year, which was a failure to record a depreciation expense of $2,087 on equipment. Also, during the current year, the company earned net income of $13,936 and declared cash dividends of $5,405. Compute the year end retained earnings balance.

Select the correct answer:

1. $19,363
2. $27,894
3. $40,791
4. $25,807