Wendell Company provided the following pertaining to its accounting year that ended December 31,2019: • Common stock with a $10,000 par value was sold for $50,000 cash
• Cash dividends totaling $20,000 were declared,of which $15,000 were paid
• Net income was $70,000
• A 5% stock dividend resulted in a common stock distribution,which had a $5,000 par value and a $23,000 market value
• Treasury stock repurchased in a prior year for $9,000 was resold for $7,000 and in the journal entry to record the sale,Additional paid-in capital was debited for the amount of the difference between the repurchase price and the resale price
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What is the amount of the increase in Wendell's retained earnings for the year ended December 31,2019?
A)$32,000.
B)$25,000.
C)$29,000.
D)$27,000.

Question

Quizplus · Accepted Answer

The increase in retained earnings is calculated as net income ($70,000) minus cash dividends declared ($20,000), resulting in an increase of $50,000. However, the stock dividend does not affect retained earnings as it is a reclassification within equity. Therefore, the increase in retained earnings is $50,000 - $20,000 = $30,000. The treasury stock transaction does not affect retained earnings.

Wendell Company Provided the Following Pertaining to Its Accounting Year