LESSON 14-1

1. LESSON 14-1 Distributing Corporate Earnings to Stockholders

2. STOCKHOLDERS’ EQUITY ACCOUNTS USED BY A CORPORATION page 405 (3000) STOCKHOLDERS’ EQUITY 3110 Capital Stock 3120 Retained Earnings 3130 Dividends 3140 Income Summary LESSON 14-1

3. DECLARING A DIVIDEND page 406 December 15. Hobby Shack’s board of directors declared a quarterly dividend of $2.00 per share; capital stock issued is 2,500 shares; total dividend, $5,000.00. Date of payment is January 15. Memorandum No. 79. 2 4 3 1 5 6 1. Write the date. 4. Write the debit amount. 2. Write the title of the account debited. 5. Write the title of the account credited. 3. Write the memorandum number. 6. Write the credit amount. LESSON 14-1

4. PAYING A DIVIDEND page 407 January 15. Paid cash for quarterly dividend declared December 15, $5,000.00. Check No. 379. 1 2 3 4 5 1. Write the date. 2. Write the account title. 3. Write the check number. 4. Write the debit account. 5. Write the credit amount. LESSON 14-1

5. TERMS REVIEW page 408 • retained earnings • dividends • board of directors • declaring a dividend LESSON 14-1

6. LESSON 14-2 Beginning an 8-Column Work Sheet for a Merchandising Business

7. 1 2 RECORDING A TRIAL BALANCE ON A WORK SHEET page 410 1. Account title 2. Account balance 3. Total, prove, and rule the debit and credit columns 3 LESSON 14-1

8. Supplies Expense—Office Adj. (a) 2,730.00 Supplies—Office Dec. 31 Bal. 3,480.00 Adj. (a) 2,730.00 (Adj Bal. 750.00) Supplies Expense—Store Adj. (b) 2,910.00 Supplies—Store Dec. 31 Bal. 3,944.00 Adj. (b) 2,910.00 (Adj Bal. 1,034.00) ANALYZING AND RECORDING SUPPLIES ADJUSTMENTS page 411 LESSON 14-1

9. 3 3 RECORDING SUPPLIES ADJUSTMENTS ON A WORK SHEET page 412 2 1 1. Write the debit amounts in the Adjustments Debit column. 2. Write the credit amounts in the Adjustments Credit column. 3. Label the two parts of the Supplies—Office adjustment with small letter a and small letter b in parentheses. LESSON 14-1

10. 3 3 ANALYZING AND RECORDING A PREPAID INSURANCE ADJUSTMENT page 413 1 2 1. Enter the amount of insurance used in the Adjustments Credit column. 2. Enter the same amount in the Adjustments Debit column. 3. Label the two parts of the adjustment with a small letter c in parentheses. LESSON 14-1

11. LESSON 14-3 Planning and Recording a Merchandise Inventory Adjustment

12. MERCHANDISE INVENTORY page 415 LESSON 14-1

13. 3 3 ANALYZING AND RECORDING A MERCHANDISE INVENTORY ADJUSTMENT page 416 2 1 1. Write the debit amount. 2. Write the credit amount. 3. Label the two parts of this adjustment with a small letter d in parentheses. LESSON 14-1

14. Merchandise Inventory Jan. 1 Bal. 294,700.00 Adj. (d) 4,200.00 (New Bal. 298,900.00) Income Summary Adj. (d) 4,200.00 ANALYZING AN ADJUSTMENT WHEN ENDING MERCHANDISE INVENTORY IS GREATER THAN BEGINNING MERCHANDISE INVENTORY page 417 LESSON 14-1

15. TERM REVIEW page 418 • merchandise inventory LESSON 14-1

16. LESSON 14-4 Planning and Recording an Allowance for Uncollectible Accounts Adjustment

17. ALLOWANCE METHOD OF RECORDING LOSSES FROM UNCOLLECTIBLE ACCOUNTS page 419 LESSON 14-1

18. Total Saleson Account × Percentage = EstimatedUncollectibleAccounts Expense ESTIMATING UNCOLLECTIBLE ACCOUNTS EXPENSE page 420 $124,500.00 × 1% = $1,245.00 LESSON 14-1

19. 3. Label the two parts with a small letter e in parentheses. 3 3 ANALYZING AND RECORDING AN ADJUSTMENT FOR UNCOLLECTIBLE ACCOUNTS EXPENSE page 421 1 2 1. Enter the estimated uncollectible amount. 2. Enter the same amount in the Adjustments Debit column. LESSON 14-1

20. TERMS REVIEW page 422 • uncollectible accounts • allowance method of recording losses from uncollectible accounts • book value • book value of accounts receivable LESSON 14-1

21. LESSON 14-5 Planning and Recording Depreciation Adjustments

22. OriginalCost Estimated TotalDepreciationExpense – ÷ EstimatedSalvage Value Years ofEstimatedUseful Life = = AnnualDepreciationExpense Estimated TotalDepreciationExpense CALCULATING DEPRECIATION EXPENSE AND BOOK VALUE page 424 (continued on next slide) 1. Subtract the asset’s estimated salvage value from original cost. 2. Divide the estimated total depreciation expense by the years of estimated useful life. 1 $1,250.00 – $250.00 = $1,000.00 2 $1,000.00 ÷ 5 = $200.00 LESSON 14-1

23. 20X2AccumulatedDepreciation Original Cost + – 20X3DepreciationExpense AccumulatedDepreciation = = 20X3AccumulatedDepreciation EndingBook Value CALCULATING DEPRECIATION EXPENSE AND BOOK VALUE page 424 (continued from previous slide) $400.00 + $200.00 = $600.00 $1,250.00 – $600.00 = $650.00 LESSON 14-1

24. 3 3 ANALYZING AND RECORDING ADJUSTMENTS FOR DEPRECIATION EXPENSE page 425 2 1 1. Write the debit amounts. 2. Write the credit amounts. 3. Label the adjustments. LESSON 14-1

25. TERMS REVIEW page 426 • current assets • plant assets • depreciation expense • estimated salvage value • straight-line method of depreciation • accumulated depreciation • book value of a plant asset LESSON 14-1

26. LESSON 14-6 Calculating Federal Income Tax and Completing a Work Sheet

27. Total of Income Statement Credit column $ 500,253.10 Less total of Income Statement Debit column before federal income tax –396,049.91 Equals Net Income before Federal Income Tax $ 104,203.19 FEDERAL INCOME TAX EXPENSE ADJUSTMENT page 427 LESSON 14-1

28. CALCULATING FEDERAL INCOME TAX page 428 LESSON 14-1

29. 3 1 1 3 RECORDING THE FEDERAL INCOME TAX ADJUSTMENT page 429 2 1. Calculate the amount of federal income tax expense adjustment. 2. Total and rule the Adjustments columns. 3. Extend account balances. LESSON 14-1

30. 1 1 2 4 5 3 COMPLETING A WORK SHEET page 430 1. Total the Income Statement and Balance Sheet columns. 2. Calculate and enter the net income after federal income tax. 3. Extend the net income amount. 4. Calculate the column totals. 5. Rule double lines. LESSON 14-1

31. A COMPLETED 8-COLUMN WORK SHEET page 432 LESSON 14-1

32. 2 3 1 5 A 10-COLUMN WORK SHEET page 434-435 4 6 1. Trial balance 5. Extend balances 6. Calculate net income; total, prove and rule 2. Adjustments 3. Extend adjusted balances 4. Total, prove, and rule LESSON 14-1