Determining the ending balance of reatainedearnings, and evaluating dividend pol
ID: 2430829 • Letter: D
Question
Determining the ending balance of reatainedearnings, and evaluating dividend policy.
The following account balances were selected from the records of Blake Corporation at December 31, 2017, after all adjusting entries were completed:
The stock price was $22.63 per share on that date.
Required:
1. Identify the amounts that would be reported in the retained earnings column of the statement of change in equity for 2017.
2. Prepare the shareholder's equity section of the statement of financial position at december 31, 2017.
3. Compute and evaluate the dividend yield ratio.
Common Shares (no par value; authorized 100,000 shares, issued 34,000 shares) $ 680,000 Contributed surplus 163,000 Dividends surplus in 2017 18,000 Reatainedearnings, January 1, 2017 75,000 Correction of prior-period accounting error (a debit, net of income tax) 8,000 Income summary for 2017 (credit balance) 28,000Explanation / Answer
1 Dividends surplus in 2017 18000 ( As a reduction from retained earnings) Reatained earnings, January 1, 2017 75000 ( As beginning balance of retained earnings) Correction of prior-period accounting error (a debit, net of income tax) 8000 ( As a reduction from retained earnings) Income summary for 2017 (credit balance) 28000 ( As an addition to retained earnings) 2 Stockholder's equity: Common Shares (no par value; authorized 100,000 shares, issued 34,000 shares) 680000 Contributed surplus 1,63,000 Retained earnings: Beginning balance 75000 Add: Income summary for 2017 (credit balance) 28000 103000 Less: Correction of prior-period accounting error (a debit, net of income tax) 8000 Dividends surplus in 2017 18000 77000 Total stockholder's equity 9,20,000 3 Dividend yield ratio=Dividend per share/Stock price per share Dividend per share=Dividend surplus/Number of common shares issued=18000/34000=0.5294=0.53 Dividend yield ratio=0.53/22.63=0.02342 or=2.34% Company was able to pay 2.34% of current stock price as dividend
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