Question

The following account balances relate to the stockholders’ equity accounts of Blue Spruce Corp. at year-end....

The following account balances relate to the stockholders’ equity accounts of Blue Spruce Corp. at year-end.

2017

2016

Common stock, 10,720 and 10,220 shares,

    respectively, for 2017 and 2016

 $ 175,660 $ 154,860

Preferred stock, 5,010 shares

 125,250 125,250

Retained earnings

 307,120 244,240


A small stock dividend was declared and issued in 2017. The market price of the shares was $ 9,320. Cash dividends were $ 19,230 in both 2017 and 2016. The common stock has no par or stated value.

(a)

What was the amount of net income reported by Blue Spruce Corp. in 2017?

Net income $
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Homework Answers

Answer #1

Solution: (a)

Blue Spruce Corp.

Calculation of Net Income reported by the Company in 2017

Retained Earnings on December 31, 2016 = $244,240

Retained Earnings on December 31, 2017 = $307,120

Small Stock Dividend declared and issued = $9,320

Cash Dividends paid — $19,230 in the year 2017

Retained Earnings Account

Cash Dividends 19,230 01/01/2017 Balance 244,240
Stock Dividends 9,320 Net Income 91,430
31/12/2017 Balance 307,120

Net Income = Closing Balance of Retained Earnings — Opening Balance of

Retained Earnings + Cash Dividends paid + Stock Dividends issued

$307,120 - 244,240 + 19,230 + 9,320

= $91,430

Net Income Reported by Blue Spruce Corp. = $91,430

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