ABC Corporation was organized on Jan 1, 2020. The firm was authorized to issue 100,000 shares of $1 par common stock. During 2020, ABC Corporation has the following transactions relating to shareholder's equity:a. Issued 10,000 shares of common stock at $3 per share. b. The board of directors declared dividends of $30,000c. Paid dividends to common shareholders of $30,000. d. Purchased 500 shares of treasury stock at $12 per share

Question

Lance Larson

Business

5 June, 12:30

ABC Corporation was organized on Jan 1, 2020. The firm was authorized to issue 100,000 shares of $1 par common stock. During 2020, ABC Corporation has the following transactions relating to shareholder's equity:a. Issued 10,000 shares of common stock at $3 per share. b. The board of directors declared dividends of $30,000c. Paid dividends to common shareholders of $30,000. d. Purchased 500 shares of treasury stock at $12 per share

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Alanna Brennan · Answer 1

The journal entries are required with corresponding effect on retained earnings;

Explanation:

a. Cash 10,000*3 Dr.$30,000

Common Stocks 10,000*1 Cr.$10,000

Paid in Capital-Common Stocks 10,000 * (3-1) Cr.$20,000

b. Dividend Expense Dr.$30,000

Dividend Payable Cr.$30,000

c. Dividend Payable Dr.$30,000

Cash Cr.$30,000

d. Treasury stock 500*12 Dr.$6,000

Cash Cr.$6,000

The retained earnings will reduce by the dividend amount of $30,000 declared and paid.