The following selected transactions took place during the current year for a com

Question

The following selected transactions took place during the current year for a company: March 25 Declared a $2 per share cash dividend on 20,000 shares of common stock outstanding April 20 Paid the cash dividends declared on March 25. Dec 31 Closed the $52,000 credit balance in Income Summary that reflects net income to Retained Earnings (a) Prepare the journal entries for these transactions. (b) If Retained Earnings had a $75,000 credit balance on January 1, calculate its year-end balance as December 31.

Explanation / Answer

Solution-a

Solution-b

Date Account Titles & Explanation Debit Credit Mar. 25 Retained Earnings (20,000*$2) $40,000 Common Dividend Payable $40,000 Apr. 20 Common Dividend Payable $40,000 Cash $40,000 Dec. 31 Income Summary $52,000 Retained Earnings $52,000

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