n April 8, 2019, GODLY Corporation declared and issued a 25% ordinary share capital dividend. Prior to this date, GODLY had 20,000 issued and outstanding shares of ₱2 par value ordinary shares. The carrying value of each share is ₱20 at the time of declaration of dividend. As a result of the share capital dividend, how much will be debited to retained earnings? a. P75,000 b. P40,000 c. P10,000 d. P100,000

n April 8, 2019, GODLY Corporation declared and issued a 25% ordinary share capital dividend. Prior to this date, GODLY had 20,000 issued and outstanding shares of ₱2 par value ordinary shares. The carrying value of each share is ₱20 at the time of declaration of dividend. As a result of the share capital dividend, how much will be debited to retained earnings? a. P75,000 b. P40,000 c. P10,000 d. P100,000

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter15: Dividend Policy

Section: Chapter Questions

Problem 5P

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On January 1, 2019, Kittson Company had a retained earnings balance of 218,600. It is subject to a 30% corporate income tax rate. During 2019, Kittson earned net income of 67,000, and the following events occurred: 1. Cash dividends of 3 per share on 4,000 shares of common stock were declared and paid. 2. A small stock dividend was declared and issued. The dividend consisted of 600 shares of 10 par common stock. On the date of declaration, the market price of the companys common stock was 36 per share. 3. The company recalled and retired 500 shares of 100 par preferred stock. The call price was 125 per share; the stock had originally been issued for 110 per share. 4. The company discovered that it had erroneously recorded depreciation expense of 45,000 in 2018 for both financial reporting and income tax reporting. The correct depreciation for 2018 should have been 20,000. This is considered a material error. Required: 1. Prepare journal entries to record Items 1 through 4. 2. Prepare Kittsons statement of retained earnings for the year ended December 31, 2019.
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