Learning Objectives
By the end of this section, you will be able to:
- The students should be able to develop the accounting for stockholders’ equity, earnings, and dividends.
- Explain “retained earnings.”
- Describe and prepare entries to restrict retained earnings.
- Describe and record prior period adjustments.
- Prepare a statement of retained earnings.
- Prepare journal entries to record cash dividends.
- Allocate dividends between preferred and common stockholders.
- Explain the effect of stock dividends and stock splits on the stockholders’ equity section of the balance sheet.
- Prepare a comprehensive stockholders’ equity section of the balance sheet, including all information needed for fair disclosure.
- Explain “discontinued operations” and how they are reported on a corporate income statement.
- Explain “extraordinary items” and how they are reported on a corporate income statement.
- Explain “cumulative adjustments” (due to changes in accounting principles) and how they are reported on a corporate income statement.
- Prepare a corporate income statement which includes income taxes, unusual items, and earnings per share.