Question

Shown below in T-account format are the changes affecting the retained earnings of Forge Corporation during 2018. At January 1 2018, the corporation had outstanding 107 million common shares, $1 par per share. Retained Earnings ($ in millions) Beginning balance 92 Retirement of 7 million common shares for $21 million Net income for the year 81 Declaration and payment of a $e.35 per share cash dividend Declaration and distribution of a 4% stock dividend 35 24 110 Ending balance Required: 1. From the information provided by the account changes you should be able to recreate the transactions that affected Forge's retained earnings during 2018. Prepare the journal entries that Forge must have recorded during the year for these transactions 2. Prepare a statement of retained earnings for Forge for the year ended 2018.

Answer 1

Answer:

Journal entries:
Date	Accounts title	Debit($)	Credit($)
		in Million	in Million
Retirement	Common Stock (7m*$1)	7
	Retained Earning (given)	4
	Addition Paid in captial-Excess in par-Common(21-7-4)	10
	Cash (given)		21
Net Income	Income Summary	81
	Retained earning		81
Cash dividend	Retained Earning (100m*0.35)	35
	Cash		35
Stock Dividend	Retained Earning (given)	24
	Common Stock (100m*4%*$1)		4
	Addition Paid in captial-Excess in par-Common(24-4)		20
Statement of Retained Earning
		Amount($ ) in Million
	Beginning Balance	92
	Add: Net Income	81
	Less: Retirement of Share	-4
	Less: Cash Dividend	-35
	Less: Stock Dividend	-24
	Ending Balance	110