Question
Part I What is par value? Is it related to a stock's market value? Please record...
Part I What is par value? Is it related to a stock's market value? Please record the following journal entries: (1) Belson Corporation sold 1,000 shares of $10 par value common stock for $17 per share. (2) Belson sold 1,000 shares of $25 par value preferred stock for $30 per share. Part II (1) What are retained earnings and does the retained earnings account have a debit or credit balance? (2) Compute the retained earnings balance at the end of the year for Parks Corporation (and please show your work), based on the following data: Retained Earnings, Jan. 1 $ 50,000 Net Income $ 100,000 Dividends Declared $ 30,000
Homework Answers
Answer #1
Par Value is the face value of the instrument like shares, bonds,etc. It is the stated value per share in the Authozised Share Capital. It is not related to market value. Market value of the share differs with respect to the change in marketing conditions. When a share is issued, only the par value portion of the issue is recorded as Stock Value, the remaining portion is recorded as Excess of Par Value Item.
Retained Earnings are the earnings achieved by the entity from its activities. It includes the profits achieved by the entity over a lifetime. Dividends paid are deducted from the retained earnings. Retained Earnings have credit balance.
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