The stockholders' equity section of Gunkel Corporation as of December 31, 2014, was as follows:

Common stock, par value $2; authorized 20,000 shares;

issued and outstanding 10,000 shares

$20,000

Paid-in capital in excess of par

30,000

Retained earnings

95,000

$145,000

On March 1, 2015, the board of directors declared a 15% stock dividend, and accordingly 1,500 additional shares were issued. On March 1, 2015, the fair value of the stock was $6 per share. For the two months ended February 28, 2015, Gunkel sustained a net loss of $15,000.

What amount should Gunkel report as retained earnings as of March 1, 2015?

Question

Business

Caden Ibarra

27 September, 09:52

The stockholders' equity section of Gunkel Corporation as of December 31, 2014, was as follows:

Common stock, par value $2; authorized 20,000 shares;

issued and outstanding 10,000 shares

$20,000

Paid-in capital in excess of par

30,000

Retained earnings

95,000

$145,000

On March 1, 2015, the board of directors declared a 15% stock dividend, and accordingly 1,500 additional shares were issued. On March 1, 2015, the fair value of the stock was $6 per share. For the two months ended February 28, 2015, Gunkel sustained a net loss of $15,000.

What amount should Gunkel report as retained earnings as of March 1, 2015?

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Answers (1)

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Lovely · Answer 1

The ending balance of the retained earning is $71,000

Explanation:

For computing the ending balance of the retained earning account, we need to apply the equation which is presented below:

Ending retained earning balance = Beginning retained earning balance - net loss - dividend declared

= $95,000 - $15,000 - (1,500 shares * $6 per share)

= $95,000 - $15,000 - $9,000

= $71,000

The 15% dividend represents additional shares issued