Question

Shown below in T-account format are the changes affecting the retained earnings of Brenner-Jude Corporation during 2021. At January 1, 2021, the corporation had outstanding 106 million common shares, $1 par per share.
  

Retained Earnings ($ in millions)
		108	Beginning balance
Retirement of 6 million common shares for $37 million	6
		97	Net income for the year
Declaration and payment of a $0.40 per share cash dividend	40
Declaration and distribution of a 5% stock dividend	23
		136	Ending balance

Required:
1. From the information provided by the account changes, you should be able to recreate the transactions that affected Brenner-Jude’s retained earnings during 2021. Prepare the journal entries that Brenner-Jude must have recorded during the year for these transactions. (Hint: In lieu of revenues and expenses, use an account titled “Income summary” to close net income or net loss.)
2. Prepare a statement of retained earnings for Brenner-Jude for the year ended 2021.

Record the retirement of common shares.

Record the closing entry for net income.

Record the declaration and payment of a cash dividend.

Record the declaration and distribution of a stock dividend

Prepare a statement of retained earnings for Brenner-Jude for the year ended 2021. (Enter your answers in millions (i.e., 10,000,000 should be entered as 10).)

BRENNER-JUDE CORPORATION
Statement of Retained Earnings
FOR THE YEAR ENDED DECEMBER 31, 2021
($ in millions)
Balance at January 1	$108
Deductions:
Balance at December 31

Answer 1