The Following Selected Transactions Took Place During the Current Year

question 223

Essay

The following selected transactions took place during the current year for a company:
$$\begin{array} {| l | l | } \hline \text { Feb } 25 & \text { Declared a } \$ 2.50 \text { per share cash dividend on } 20,000 \text { shares of common } \\&\text { stock outstanding }\\\hline \text { Mar. } & 20 \text { Paid the cash dividends declared on Feb. } 25 . \\\hline \text { Dec } & \text { Closed the } \$ 72,000 \text { credit balance in Income Summary that reflects net } \\31 & \text { income to Retained Earnings. }\\\hline\end{array}$$
(a)Prepare the journal entries for these transactions.
(b)If Retained Earnings had a $155,000 credit balance on January 1,calculate its year-end balance as of December 31.

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Definitions:

Gains From Trade

Gains achieved by dividing tasks and trading; in this way people can get more of what they want through trade than they could if they tried to be self-sufficient.

Total Surplus

The sum of consumer surplus and producer surplus; a measure of the total benefit to society from a market transaction.

Consumer Surplus

The differential between consumers’ readiness to pay a certain amount for a service or good and the payment completed.

Equilibrium

The condition in a market where the quantity demanded equals the quantity supplied, leading to no inherent force for price change.