Retained Earnings: Transactions and Statement

The stockholders$$ equity of Carly Corporation at January $1$ follows:

$6$ Percent preferred stock, $$10$ par value, $40,000$ shares authorized;

$25,000$ shares issued and outstanding $$250,000$

Common stock, $$1$ par value, $300,000$ shares authorized; $80,000$ shares

issued and outstanding $80,000$

Paid$-$in capital in excess of par value$$Common stock $560,000$

Retained earnings $830,000$

Total Stockholders$$ Equity $$1,720,000$

The following transactions, among others, occurred during the year:

June $18$ Declared a $70$ percent stock dividend on all outstanding shares of common stock. The market value of the stock was $$14$ per share.

July $1$ Issued the stock dividend declared on June $18.$

Dec. $20$ Declared the annual cash dividend on the preferred stock and a cash dividend of $$1\mathrm{.}80$ per share on the common stock, payable on January $20$ to stockholders of record on December $28.$

Required

a$.$ Prepare journal entries to record the foregoing transactions.

General Journal

Date Description Debit Credit

Jun$\mathrm{.}18$ Answer

Stock Dividends

Answer

$56,000$

Answer

$0$

Answer

Stock Dividends Distributable

Answer

$0$

Answer

$56,000$

Declared stock dividend.

Jul$\mathrm{.}1$ Answer

Stock Dividends Distributable

Answer

$56,000$

Answer

$0$

Answer

Common Stock

Answer

$0$

Answer

$56,000$

Issued common shares as stock dividend.

Dec$\mathrm{.}20$ Answer

Cash Dividends

Answer

Answer

$0$

Answer

Dividends Payable $-$ Preferred Stock

Answer

$0$

Answer

$15,000$

Dividends Payable $-$ Common Stock Answer

$0$

Answer

Declared a cash dividend on preferred and common stock outstanding.

b$.$ Prepare a statement of retained earnings. The net income for the year is $$500,000.$

Do not use negative signs with your answers.

CARLY CORPORATION

Statement of Retained Earnings

For the Year Ended December $31$

Retained Earnings, January $1$ Answer

$830,000$

Answer

Net Income

Answer

$500,000$

Answer

$1,330,000$

Answer

Cash Dividends Declared

Answer

Stock Dividends Declared Answer

$56,000$

Answer

Answer

Retained Earnings, December $31$

Answer