Question - The ACJ Corporation was organized on January 1, Year 1 with the investment of $400,000 by each of its four stockholders. Net income for its first year of business was $182,000. There was a loss of $62,000 in Year 2. Net income during Year 3 was $195,000 and increased by $50,000 during Year 4. The ACJ Corporation paid no dividends during Year 1 and Year 2. It then paid $26,000 in dividends in Year 3 and increased it to $38,000 for the next year. During Year 3, $700,000 additional stock was issued.
1. Prepare a statement of retained earnings for each of the 4 years.
2. What is the total SE for each of the 4 years?
3. What is the balance in the retained earnings on January 1, Year 5?
4. What is the balance in the common stock (also called contributed capital or capital stock) on 01/01/Year 5?
5. Should the ending retained earnings equal the cash on balance sheet? Explain.
6. Should ending retained earnings equal NI? Explain.