Corporations: Dividends, Retained Earnings, and Income Reporting

In 2020, Pennington Corporation had net sales of $600,000 and cost of goods sold of $360,000, Operating expenses were $153,000, and interest expense was $7,500. The corporation's tax rate is 30%. The corporation declared preferred dividends of $15,000 in 2020, and its average common stockholders equity during the year was $200,000.

Instruction

Prepare an income statement for Pennington Corporation.
Compute Pennington Corporation's return on common stockholders' equity 2020.

On January 1, 2020, Eddy Corporation had retained earnings of $650,000. During the year, Eddy had the following selected transactions.

Declared cash dividends $120,000.
Corrected overstatement of 2019 net income because of inventory error $40,000.
Earned net income $350,000.
Declared stock dividends $90,000.

Instructions

Prepare a retained earnings statement for the year.

Newland Company reported retained earnings at December 31, 2019, of $310,000. Newland had 200,000 shares of common stock outstanding at the beginning of 2020. The following transactions occurred during 2020.

An error was discovered, In 2018, depreciation expense was recorded at $70,000, but the correct amount was $50,000.
A cash dividend of $0.50 per share was declared and paid.
A 5% stock dividend was declared and distributed when he market price per share was $15 per share
Net income was $285,000.

Instructions

Prepare a retained earnings statement for the year.

Dirk Company reported the following balances at December 31, 2020; common stock $500,000, paid-in-capital in excess of par value-common stock $100,00, and retained earnings $250,000. During 2021, the following transactions affected stockholders equity.

Issued preferred stock with a par value of $125,000 for $200,000
Purchased treasury stock (common) for $40,000
Earned net income of $180,000.
Declared and paid ash dividends of $56,000

Instructions

Prepare the stockholders' equity section of Dirk Company's December 31, 2021, balance sheet.

The following accounts appear in the ledger of Horner Inc. after the books are closed at December 31.

Instructions

Prepare the stockholders' equity section at December 31, assuming retained earnings is restricted for plant expansion in the amount of $100,000.

The following information is available for Norman Corporation for the year ended December 31, 2020; sales revenue $700,000, other revenues and gains $92,000, operating expenses $110,000, cost of goods sold $465,000, other expenses and losses $32,000, and preferred stock dividends $30,000. The company's tax rate was 30%, and it had 50,000 shares outstanding during the entire year.

Instruction

Prepare a corporate income statement.
Calculate earnings per share

The financial information is available for Plummer Corporation.

The weighted-average number of shares of common stock outstanding was 80,000 for 2019 and 100,000 for 2020.

Instruction

Calculate earnings per share and return on common stockholders' equity for 2020 and 2019.

At December 31, 2020, Millwood Corporation has 2,000 shares of $100 par value, 8%, preferred stock outstanding and 100,000 shares of $10 par value common stock issued. Millwood's net income for the year is $241,000.

Instruction

Compute the earnings per share of common stock under the following independend situations. (Round to two decimals.)

The dividend to preferred stockholders was declared. There has been no change in the number of shares of common stock outstanding during the year.
The dividend to preferred stock holders was not declared. The preferred stock is cumulative. Millwood held 10,000 shares of common treasury stock throughout the year.

The financial information is available for Klinger Corporation

The weighted-average number of shares of common stock outstanding was 180,000 for 2019 and 150,000 for 2020.

Instruction

Calculate earnings per share and return on common stockholders' equity for 2020 and 2019.

Before preparing financial statements for the current year, the chief accountant for Toso Company discovered the following errors in the accounts.

The declaration and payment of $50,000 cash dividend was recorded as a debit to interest Expense $50,000 and a credit to Cash $50,000.
A 10% stock dividend (1,000 shares) was declared on the $10 par value stock when the market price per share was $18. The only entry made was Stock Dividends (Dr.) $10,000 and Dividend Payable (Cr.) $10,000. The shares have not been issued.
A 4-for-1 stock split involving the issue of 400,000 shares of $5 par value common stock for 100,000 shares of $20 par value common stock was recorded as a debit to Retained Earnings $2,000,000 and a credit to common stock $2,000,000.

Instructions

Prepare the correcting entries at December 31.

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