Show the following details for Spencer Corporation in the t-account for Retained Earnings:

• At the beginning of 2018, Spencer had a $50,000 debit balance in retained earnings
• During 2018 the company earned $300,000 of net income and closed the amount into retained earnings.

• The company wants to pay a $2.00 per share dividend on each of its 25,000 shares of common stock. How will the dividends affect retained earnings? Show the effects in the t-account.
• Before the company can pay its common shareholders, it must pay dividends to its preferred shareholders. Spencer has 5,000 shares of 8%, $100 par cumulative preferred stock but hasnt paid preferred dividends since 2015. How much must the company pay in preferred dividends to get caught up? Show the effects of the preferred dividends in the t-account.
• Compute the ending balance in retained earnings. What will the final balance be?

a. $180,000 b. $80,000 c. $130,000 d. $200,000 e. $7,000,000

Retained Earnings