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Question 6 Loki Corporation earned net income of $90,000 during the year ended December 31 2016....

Question 6

Loki Corporation earned net income of $90,000 during the year ended December 31 2016. On December 15, Loki had declared the annual cash dividend on its $0.35 preferred shares (5,000 shares issued for $80,000) and a $0.40 per share cash dividend on its common shares (20,000 shares issued for $60,000). Loki then paid the dividends on January 4, 2017.

  1.    Journalize the following for Loki Corporation:
  •     Declaring the cash dividends on December 15, 2016.
  •     Paying the cash dividends on January 4, 2017.
  1.    Did Retained Earnings increase or decrease during 2016? If so, by how much?
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Answer #1

Journalize the following for Loki Corporation

Date Debit Credit
Dec-15 Retaining Earnings $    9,750
Dividends payable (5000 * $0.35) + (20000 * $0.40) $ 9,750
Jan-04 Dividends payable $    9,750
Cash $ 9,750

Did Retained Earnings increase or decrease during 2016? If so, by how much?

Retained Earnings
Net Income $ 90,000
Dividend $    9,750
Retained Earnings Increase in 2016 $ 80,250

Explanations :-

Dividends
Preferred Dividend (5000 * $0.35) $    1,750
Common Dividend (20000 * $0.4) $    8,000
$    9,750
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