Question

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

RENN-DEVER CORPORATION Statements of Retained Earnings For the Years Ended December 31
	2021			2020			2019
Balance at beginning of year	$	7,182,952		$	5,826,052		$	6,004,552
Net income (loss)		3,588,700			2,480,900			(178,500	)
Deductions:
Stock dividend (39,000 shares)		273,000
Common shares retired (138,000 shares)					276,000
Common stock cash dividends		989,950			848,000			0
Balance at end of year	$	9,508,702		$	7,182,952		$	5,826,052

At December 31, 2018, common shares consisted of the following:

Common stock, 1,970,000 shares at $1 par	$	1,970,000
Paid-in capital—excess of par		11,820,000

Required:
Infer from the reports the events and transactions that affected Renn-Dever Corporation’s retained earnings during 2019, 2020, and 2021. Prepare the journal entries that reflect those events and transactions. (Hint: In lieu of revenues and expenses, use an account titled "Income summary" to close net income or net loss.) (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Answer 1

Solution:

Renn - Dever
Journal Entries
Year	S.no.	Particulars	Debit	Credit
2019	1	Retained Earnings Dr	$1,78,500
		To Income Summary		$1,78,500
2020	2	Income Summary Dr	$24,80,900
		To Retained Earnings		$24,80,900
	3	Common Stock Dr (138000*$1)	$1,38,000
		Paid in Capital in excess of Par Dr ($11,820,000/1970000*138000)	$8,28,000
		To Cash		$6,90,000
		To Retained Earnings		$2,76,000
	4	Cash Dividend Dr	$8,48,000
		To Dividend payable		$8,48,000
	5	Dividend Payable Dr	$8,48,000
		To Cash		$8,48,000
2021	6	Income Summary Dr	$35,88,700
		To Retained Earnings		$35,88,700
	7	Stock Dividend Dr	$2,73,000
		To Common Stcok (39000*$1)		$39,000
		To Paid in Capital in excess of Par		$2,34,000
	8	Cash Dividend Dr	$9,89,950
		To Dividend payable		$9,89,950
	9	Dividend Payable Dr	$9,89,950
		To Cash		$9,89,950