Problem - The equity sections from the December 31, 2015 and 2016, balance sheets of Synergy Acquisition Corporation appeared as follows:
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Contributed Capital
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2016
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2015
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Common shares, unlimited shares authorized, 18,900 and 8,500 shares issued and outstanding respectively
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$268,920
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$240,000
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Retained Earnings
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480,000
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162,000
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The following occurred during 2016:
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February 15
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A $0.48 per share cash dividend was declared, the date of record is Feb 20th, and the date of payment is February 28th
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February 28
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Paid the cash dividend.
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March 2
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500 common shares were issued at $27.60 per share.
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May 15
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A $0.48 per share cash dividend was declared, the date of record is May 20th, and the date of payment is May 30th
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May 30
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Paid the cash dividend.
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August 15
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A 2:1 share split was declared and distributed to shareholders of record on August 20th.
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October 4
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A 5% share dividend was declared when the market value was $16.80 per share.
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October 20
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The dividend shares were issued.
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November 15
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A $0.48 per share cash dividend was declared, the date of record is Nov 20th, and the date of payment is Nov 30th
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November 30
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Paid the cash dividend
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December 31
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Close the Dividend account(s).
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Required:
1. Record the journal entries for the above transactions.
2. How much net income did the company earn during 2016?
3. Calculate EPS (must also calculate the weighted average number of common shares).
1. Restrictions on retained earnings can be:
A. Limits that identify how much of the retained earnings balance is not available for dividends or the repurchase of shares
B. Statutory limits set by government.
C. Due to loan agreements.
D. Set by a corporation's directors in order to limit dividends and maintain cash.
E. All of these answers are correct.
2. The financial statement impact for a company that desires to make a change in accounting policy include(s):
A. Retrospective restatement of prior period financial statements.
B. Financial impact charged or credited (net of tax) to the opening balance of retained earnings.
C. The nature and justification for the change.
D. The effect of the change on current year net income.
E. All of these answers are correct.
3. Retained earnings:
A. Are the cumulative net profits or losses minus dividends paid since the date of incorporation.
B. Are part of the income statement.
C. Represent an amount of cash available to pay shareholders.
D. Are the cumulative net profits or losses minus dividends paid since the date of incorporation, and are part of shareholders' equity.
E. All of these answers are correct