Question 6

Loki Corporation earned net income of $90,000 during the year ended December 31 2016. On December 15, Loki had declared the annual cash dividend on its $0.35 preferred shares (5,000 shares issued for $80,000) and a $0.40 per share cash dividend on its common shares (20,000 shares issued for $60,000). Loki then paid the dividends on January 4, 2017.

1. Journalize the following for Loki Corporation:

• Declaring the cash dividends on December 15, 2016.
• Paying the cash dividends on January 4, 2017.

2. Did Retained Earnings increase or decrease during 2016? If so, by how much?