At the beginning of the current year, Bard Corporation had 400,000 shares of $1 par common stock outstanding and had retained earnings of $11,000,000. During the year, the company earned $5,000,000, declared a 5% stock dividend when the price of stock was $25 per share, and paid a yearend cash dividend of $2 per share. (The cash dividend was paid after the stock dividend had been distributed.) Bard Corporation's retained earnings at the end of the year amount to:

a. $16,000,000.

b. $14,660,000.

c. $14,320,000.

d. $14,700,000.

Question

Business

Lincoln Garrett

6 December, 05:25

At the beginning of the current year, Bard Corporation had 400,000 shares of $1 par common stock outstanding and had retained earnings of $11,000,000. During the year, the company earned $5,000,000, declared a 5% stock dividend when the price of stock was $25 per share, and paid a yearend cash dividend of $2 per share. (The cash dividend was paid after the stock dividend had been distributed.) Bard Corporation's retained earnings at the end of the year amount to:

a. $16,000,000.

b. $14,660,000.

c. $14,320,000.

d. $14,700,000.

+3

Answers (1)

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Myah · Answer 1

b. $14,660,000

Explanation:

The computation of retained earnings at the end of the year is shown below:-

Retained earnings = Beginning retained earning + Net income - Stock dividend - Cash dividend

= $11,000,000 + $5,000,000 + $500,000 - $840,000

= $14,660,000

Working Note : -

Stock Dividend = 400,000 * 5% * $25

= $500,000

Cash dividend = (400,000 + (400,000 * 5%) * $2

= 420,000 * $2

= $840,000