Question

Comparative statements of retained earnings for Renn-Dever Corporation were reported in its 2021 annual report as follows.

Answer 1

Answer:

Renn-Dever Corporation

a. The events and transactions that affected Renn-Dever Corporation's retained earnings during 2019, 2020, and 2021 include:

2019:

Net Loss from the Income Statement of $165,000 reduced the retained earnings balance.

2020:

Net Income from the Income Statement of $2,300,900 increased the retained earnings balance.

Some Common Stock held in Treasury Stock were retired permanently to the tune of $240,000.  This reduced the balance of the retained earnings.

Declaration and payment of cash dividend of $758,000 reduced the retained earnings balance.

2021:

There was a net income of $3,408,700 from the income statement which increased the retained earnings balance.

The Company declared stock dividends of $241,500  and cash dividends of $899,950, which together reduced the retained earnings balance.

b. 2019:

Debit Retained Earnings $165,000

Credit Income Summary $165,000

To record the net loss transferred to Retained Earnings.

2020:

Debit Income Summary $2,300,900

Credit Retained Earnings $2,300,900

To record the net income transferred to Retained Earnings.

Debit Retained Earnings $240,000

Credit Treasury Stock $240,000

To record the common stock retired.

Debit Retained Earnings $758,000

Credit Dividends $758,000

To record the cash dividends to stockholders.

2021:

Debit Income Summary $3,408,700

Credit Retained Earnings $3,408,700

To record the transfer of net income to retained earnings.

Debit Retained Earnings $241,500

Credit Stock Dividends $241,500

To record the stock dividends (34,500 shares) to stockholders.

Debit Retained Earnings $899,950

Credit Cash Dividends $899,950

To record the cash dividends to stockholders.

Explanation:

a) Data and Calculations:

RENN-DEVER CORPORATION

Statements of Retained Earnings  

For the Years Ended December 31  2021             2020           2019

Balance at beginning of year   $6,962,452  $5,659,552  $5,824,552

Net income (loss)                         3,408,700    2,300,900       (165,000)

Deductions:

Stock dividend  (34,500 shares)   241,500

Common shares retired (120,000 shares)        240,000

Common stock cash dividends   899,950        758,000           0

Balance at end of year            $9,229,702  $6,962,452    $5,659,552