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Ending retained earnings

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On 25 March, Phelps Company declared $2 per share cash dividend on 20,000 shares of common stock outstanding; paid cash dividends on 20 April that were declared on 25 March; On December 31st, Phelps Company closed its $52,000 credit balance in Income Summary (reflecting net income) to Retained Earnings. What would be the journal entries for each? What is the calculation for the year end balance for Phelphs Company if Retained Earnings has a $75,000 credit balance?

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Solution Summary

The solution explains the journal entries and the calculation for ending retained earnings.

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Total amount of dividend is 20,000 shares X $2 = $40,000
When dividends are declared, they are recorded are dividends payable
25 March Retained Earnings ...

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