Question

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. 1. A cash dividend of $0.50 per share was declared and paid. 2. A 5% stock dividend was declared and distributed when the market price per share was $15 per share. 3. Net income was $285,000. Compute the ending balance in retained earnings at the end of 2020.

Answer 1

$495,000

Step-by-step explanation:

retained earnings December 31, 2019 = $310,000

cash dividends = 200,000 x $0.50 = $100,000

net income during 2020 = $285,000

ending balance of retained earnings for December 31, 2020 = $495,000

stock dividends do not affect retained earnings