Q16E. (Computation of Retained Earning... [FREE SOLUTION]

Chapter 15: Q16E. (page 815)

(Computation of Retained Earnings) The following information has been taken from the ledger accounts of Isaac Stern Corporation.
Total income since incorporation $317,000
Cash dividends paid 60,000
Total value of stock dividends distributed 30,000
Gains on treasury stock transactions 18,000
Unamortized discount on bonds payable 32,000
Instructions
Determine the current balance of retained earnings.

Short Answer

Expert verified

The total current balance of Retained earnings is$227,000.

Step by step solution

Meaning of Retained Earnings

A corporation's retained earnings are the remaining profits after all of a corporation's costs, revenues, income taxes, and distributions to shareholdersare paid. An investment in new equipment, R&D, and marketing can be made using this portion of an organization's equity.

Determining the Current balance of Retained Earnings

Total income since incorporation

$317,000

Less: Total cash dividends paid $60,000

The total value of stock dividends is 30,000

90,000

The current balance of retained earnings

$227,000

The unamortized discount on bonds payable is shown as a contra liability; the gains on treasury stock are recorded as additional paid-in capital.

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BRUNO CORPORATION POST-CLOSING TRIAL BALANCE DECEMBER 31, 2017
	Dr.	Cr.
Accounts payable		\( 310,000
Accounts receivable	\) 480,000
Accumulated depreciation鈥攂uildings		185,000
Additional paid-in capital in excess
of par鈥攃ommon		1,300,000
From treasury stock		160,000
Allowance for doubtful accounts		30,000
Bonds payable		300,000
Buildings	1,450,000
Cash	190,000
Common stock (\(1 par)		200,000
Dividends payable (preferred stock鈥攃ash)		4,000
Inventory	560,000
Land	400,000
Preferred stock (\)50 par)		500,000
Prepaid expenses	40,000
Retained earnings		301,000
Treasury stock (common at cost)	170,000
Totals	\(3,290,000	\)3,290,000

At December 31, 2017, Bruno had the following number of common and preferred shares.
	Common	Preferred
Authorized	600,000	60,000
Issued	200,000	10,000
Outstanding	190,000	10,000

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Short Answer

Step by step solution

Meaning of Retained Earnings

Determining the Current balance of Retained Earnings

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