© 2014 Cengage Learning. All Rights Reserved. Learning Objectives LO1 Explain the relationship between retained earnings and dividends. LO2 Account for the declaration and payment of dividends. LO3 Journalize the declaration and payment of a dividend. © 2014 Cengage Learning. All Rights Reserved.

Stockholders’ Equity Accounts Used by a Corporation Lesson 11-1 Stockholders’ Equity Accounts Used by a Corporation LO7 (3000) STOCKHOLDERS’ EQUITY 3110 Capital Stock 3130 Retained Earnings 3140 Dividends 3150 Income Summary

Stockholders’ Equity Accounts Used by a Corporation Lesson 11-1 Stockholders’ Equity Accounts Used by a Corporation LO7 An amount earned by a corporation and not yet distributed to stockholders is called retained earnings. Earnings distributed to stockholders are called dividends.

Lesson 11-1 Declaring a Dividend LO8 A group of persons elected by the stockholders to govern a corporation is called the board of directors. Action by a board of directors to distribute corporate earnings to stockholders is called declaring a dividend.

Lesson 11-1 Declaring a Dividend LO8 December 15. Hobby Shack’s board of directors declared a quarterly dividend of $0.05 per share; capital stock issued is 75,000 shares; total dividend, $3,750.00. Date of payment is January 15. Memorandum No. 43. Dividends 3,750.00 Dividends Payable 3,750.00 2 Account Debited 3 Memorandum Number 1 Date 4 Debit Amount 5 Account Credited 6 Credit Amount

Paying Declared Dividends Lesson 11-1 Paying Declared Dividends LO8 Dividends Payable 04/15 Paid 3,750.00 07/15 Paid 3,750.00 10/15 Paid 3,750.00 01/15 Paid 3,750.00 03/15 Paid 3,750.00 06/15 Paid 3,750.00 09/15 Paid 3,750.00 12/15 Paid 3,750.00 January 15. Paid cash for quarterly dividend declared column. Cash 01/15 Paid 3,750.00 1 Date 2 Account Title 3 Check Number 4 Debit Amount 5 Credit Amount

© 2014 Cengage Learning. All Rights Reserved. Learning Objectives LO1 Plan work sheet adjustments for merchandise uncollectible accounts © 2014 Cengage Learning. All Rights Reserved.

Lesson 11-4 Planning and Recording an Allowance for Uncollectible Accounts Adjustment Accounts receivable that cannot be collected are called uncollectible accounts. Allowance for Uncollectible Accounts (contra to AR) Crediting the estimated value of uncollectible accounts to a contra account is called the allowance method of recording losses from uncollectible accounts.

Lesson 11-4 Planning and Recording an Allowance for Uncollectible Accounts Adjustment The difference between asset’s account balance and its related contra account is called book value. The book value of accounts receivable represents the total amount of accounts receivable the business expects to collect in the future.

© 2014 Cengage Learning. All Rights Reserved. Learning Objectives LO1 Plan work sheet adjustments for depreciation. © 2014 Cengage Learning. All Rights Reserved.

Lesson 11-5 Categories of Assets Cash and other assets expected to be exchanged for cash or consumed within a year are called current assets. Assets that will be used for a number of years in operation of a business are called plant assets.

Depreciating Plant Assets Lesson 11-5 Depreciating Plant Assets The portion of a plant assets cost that is transferred to an expense account in each fiscal period during a plant asset’s useful life is called depreciation expense. The amount an owner expects to receive when a plant asset is removed from use is called estimated salvage value.

Calculating Depreciation Expense And Book Value Lesson 11-5 Calculating Depreciation Expense And Book Value Charging an equal amount of depreciation expense for a plant asset in each year of useful like is called straight-line method of depreciation. The total amount of depreciation expense that has been recorded since the purchase of a plant asset is called accumulated depreciation. The original cost of a plant asset minus accumulated depreciation is called book value of a plant asset.

© 2014 Cengage Learning. All Rights Reserved. Learning Objectives LO1 Calculate federal income tax and plan the work sheet adjustments for federal income tax. LO2 Complete a work sheet for a merchandising business. © 2014 Cengage Learning. All Rights Reserved.

Calculating Federal Income Tax Lesson 15-4 Calculating Federal Income Tax LO8 Different tax rates are applied to different levels of net income. Each tax rate and taxable income amount on one line of a tax table is called a tax bracket. The tax rate associated with a tax bracket is called a marginal tax rate.

Calculating Federal Income Tax Lesson 15-4 Calculating Federal Income Tax LO8 Net Income before Federal Income Taxes − Of the Amount Over = Net Income Subject to Marginal Tax Rate × Marginal Tax Rate Marginal Income Tax $103,518.97 − $100,000.00 = $3,518.97 × 39% $1,372.40 Bracket Minimum Income Tax + Marginal Income Tax = Federal Income Tax $22,250.00 + $1,372.40 = $22,622.40