Question

Use the following information to answer question 41 and 42. On January 1, 2018, Tarow Corporation had 80,000 common shares, recorded at $600,000, and retained earnings of $1,000,000. During the year, the following transactions occurred:

Apr.	2	Issued 5,000 common shares at $20 per share.
June	15	Declared a cash dividend of $0.25 per share to common shareholders of record on June 30, payable on July 10.
Aug.	21	Declared a 5% stock dividend to common shareholders of record on September 5, distributable on September 20. The shares were trading for $22 a share on August 21, $24 on September 5, and $26 on September 20.
Nov.	1	Issued 3,000 common shares at $25 per share.
Nov.	15	Declared and issued a 2-for-1 stock split
Dec.	20	Declared a cash dividend of $0.30 per share to common shareholders of record on December 31, payable on January 10.
Dec.	31	The net income for the year of 2018 is $20,000

The amount of total dividends declared on common shares on August 21, 2018 is:

Question 41 options:

	$88,000
	$93,500
	$110,500
	$35,000

The balance of retained earnings as at December 31, 2018 after the end-of-year closing is:

Question 42 options:

	$1,000,000
	$829,900
	$877,575
	$849,900

Answer 1

Solution-41; $93500 Correct answer

Dividend Declared on 21 August 2018

= (80000+5000)*5%*22=$93500

Solution-42; $849900 Correct answer
Computation of Retaiend Eanrring Balance on Tarow Corporation
Beg Balance	$1,000,000.00
Less: Cash Dividend on 15 June (85000*0.25)	$21,250.00
Less: Stock Dividend on 21 Aug	$93,500.00
Less: Cash Dividend on 20 Dec (85000+4250+3000)*2*0.30	$55,350.00
Add: Net Income	$20,000.00
Ending Balance	$849,900.00