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CHAPTER 14
Corporations: Dividends, Retained Earnings, and Income Reporting
ASSIGNMENT CLASSIFICATION TABLE
Brief Exercises 1, 2, 3 A Problems 1A, 2A, 3A, 4A, 5A B Problems 1B, 2B, 3B, 4B, 5B

Study Objectives 1. Prepare the entries for cash dividends and stock dividends. Identify the items reported in a retained earnings statement. Prepare and analyze a comprehensive stockholders’ equity section. Describe the form and content of corporation income statements. Compute earnings per share.

Questions 1, 2, 3, 4, 5, 6, 7, 8

Exercises 1, 2, 3, 4, 5, 6, 7

2.

9, 10, 11, 12, 13, 14

4, 5

6, 8, 9

2A, 3A, 4A

2B, 3B, 4B

3.

14, 15

6, 7

5, 6, 10, 11, 13, 15, 16

1A, 2A, 3A, 4A, 5A

1B, 2B, 3B, 4B, 5B

4.
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The purpose of this date is to identify the persons or entities that will receive the dividend. Payment date is the date on which the dividend checks are mailed to the stockholders. (b) The accounting entries and their dates are: Declaration date—Debit Retained Earnings and Credit Dividends Payable. No entry is made on the record date. Payment date—Debit Dividends Payable and Credit Cash. The allocation of the cash dividend is as follows: Total dividend............................................................................................... Allocated to preferred stock Dividends in arrears—one year....................................................... Current year dividend ........................................................................ Remainder allocated to common stock................................................... 5. $45,000 $10,000 10,000

2.

3.

4.

20,000 $25,000

A cash dividend decreases assets, retained earnings, and total stockholders’ equity. A stock dividend decreases retained earnings, increases paid-in capital, and has no effect on total assets and total stockholders’ equity. A corporation generally issues stock dividends for one of the following reasons: (1) To satisfy stockholders’ dividend expectations without spending cash. (2) To increase the marketability of its stock by increasing the number of shares outstanding and thereby decreasing the

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