RETAINED EARNINGS Problem 26-1 (AICPA Adapted) East Company had sufficient retained earnings in 2017 as a basis for dividends but was temporarily short of cash. The entity declared a dividend of P1,000,000 on April 1, 2017, and issued promissory notes to the shareholders in lieu of cash. The notes, which were dated April 1, 2017, had a maturity date of March 31, 2018 and a 10% interest rate. How should the scrip dividend and related interest be accounted for? a. Debit retained earnings P1,100,000 on April 1, 2017. b. Debit retained earnings P1,100,000 on March 31, 2018. c. Debit retained earnings P1,000,000 on April 1, 2017 and debit interest expense P100,000 on March 31, 2018. Debit retained earnings P1,000,000 on April 1, 2017 and debit interest expense P75,000 on December 31, 2017. d.
RETAINED EARNINGS Problem 26-1 (AICPA Adapted) East Company had sufficient retained earnings in 2017 as a basis for dividends but was temporarily short of cash. The entity declared a dividend of P1,000,000 on April 1, 2017, and issued promissory notes to the shareholders in lieu of cash. The notes, which were dated April 1, 2017, had a maturity date of March 31, 2018 and a 10% interest rate. How should the scrip dividend and related interest be accounted for? a. Debit retained earnings P1,100,000 on April 1, 2017. b. Debit retained earnings P1,100,000 on March 31, 2018. c. Debit retained earnings P1,000,000 on April 1, 2017 and debit interest expense P100,000 on March 31, 2018. Debit retained earnings P1,000,000 on April 1, 2017 and debit interest expense P75,000 on December 31, 2017. d.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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QC 46.
Transcribed Image Text:RETAINED EARNINGS
Problem 26-1 (AICPA Adapted)
East Company had sufficient retained earnings in 2017 as a basis for
dividends but was temporarily short of cash.
The entity declared a dividend of P1,000,000 on April 1, 2017, and
issued promissory notes to the shareholders in lieu of cash.
The notes, which were dated April 1, 2017, had a maturity date of March
31, 2018 and a 10% interest rate.
How should the scrip dividend and related interest be accounted for?
a. Debit retained earnings P1,100,000 on April 1, 2017.
b. Debit retained earnings P1,100,000 on March 31, 2018.
c. Debit retained earnings P1,000,000 on April 1, 2017 and debit
interest expense P100,000 on March 31, 2018.
d.
Debit retained earnings P1,000,000 on April 1, 2017 and debit
interest expense P75,000 on December 31, 2017.
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