LESSON 14-1
Distributing Corporate
Earnings to Stockholders
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
2
STOCKHOLDERS’ EQUITY ACCOUNTS
USED BY A CORPORATION
3110
3120
3130
3140
page 405
(3000) STOCKHOLDERS’ EQUITY
Capital Stock
Retained Earnings
Dividends
Income Summary
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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
1. Write the date.
2. Write the title of the account
debited.
3. Write the memorandum number.
6
4. Write the debit amount.
5. Write the title of the account
credited.
6. Write the credit amount.
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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
1.
2.
3.
4.
5.
2
3
4
5
Write the date.
Write the account title.
Write the check number.
Write the debit account.
Write the credit amount.
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 14-1
5
TERMS REVIEW




page 408
retained earnings
dividends
board of directors
declaring a dividend
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 14-1
LESSON 14-2
Beginning an 8-Column
Work Sheet for a
Merchandising Business
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
7
RECORDING A TRIAL BALANCE ON A
WORK SHEET
1
1. Account title
2. Account balance
3. Total, prove, and
rule the debit and
credit columns
page 410
2
3
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 14-1
8
ANALYZING AND RECORDING SUPPLIES
ADJUSTMENTS
Adj. (a)
Dec. 31 Bal.
(Adj Bal.
Adj. (b)
Dec. 31 Bal.
(Adj Bal.
page 411
Supplies Expense—Office
2,730.00
Supplies—Office
3,480.00 Adj. (a)
750.00)
2,730.00
Supplies Expense—Store
2,910.00
Supplies—Store
3,944.00 Adj. (b)
1,034.00)
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
2,910.00
LESSON 14-1
9
RECORDING SUPPLIES ADJUSTMENTS
ON A WORK SHEET
page 412
3
2
3
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.
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 14-1
10
ANALYZING AND RECORDING A
PREPAID INSURANCE ADJUSTMENT
page 413
3
1
3
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.
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 14-1
LESSON 14-3
Planning and Recording a
Merchandise Inventory
Adjustment
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
12
MERCHANDISE INVENTORY
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
page 415
LESSON 14-1
13
ANALYZING AND RECORDING A MERCHANDISE
INVENTORY ADJUSTMENT
page 416
3
2
3
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.
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 14-1
ANALYZING AN ADJUSTMENT WHEN ENDING
MERCHANDISE INVENTORY IS GREATER THAN
BEGINNING MERCHANDISE INVENTORY
Jan. 1 Bal.
Adj. (d)
(New Bal.
14
page 417
Merchandise Inventory
294,700.00
4,200.00
298,900.00)
Income Summary
Adj. (d)
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
4,200.00
LESSON 14-1
15
TERM REVIEW
page 418
 merchandise inventory
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 14-1
LESSON 14-4
Planning and Recording an
Allowance for Uncollectible
Accounts Adjustment
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
17
ALLOWANCE METHOD OF RECORDING
LOSSES FROM UNCOLLECTIBLE ACCOUNTS
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
page 419
LESSON 14-1
18
ESTIMATING UNCOLLECTIBLE
ACCOUNTS EXPENSE
page 420
Total Sales
on Account
×
Percentage
=
$124,500.00
×
Estimated
Uncollectible
Accounts
Expense
1%
=
$1,245.00
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 14-1
19
ANALYZING AND RECORDING AN ADJUSTMENT
page 421
FOR UNCOLLECTIBLE ACCOUNTS EXPENSE
3
1
3
2
1. Enter the estimated uncollectible
amount.
2. Enter the same amount in the
Adjustments Debit column.
3. Label the two parts with a small
letter e in parentheses.
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 14-1
LESSON 14-5
Planning and Recording
Depreciation Adjustments
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
22
CALCULATING DEPRECIATION EXPENSE
page 424
AND BOOK VALUE (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.
–
Estimated
Salvage
Value
=
Estimated Total
Depreciation
Expense
–
$250.00
=
$1,000.00 1
Estimated Total
Depreciation
Expense
÷
Years of
Estimated
Useful Life
=
$1,000.00
÷
5
=
Original
Cost
$1,250.00
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
Annual
Depreciation
Expense
$200.00 2
LESSON 14-1
23
CALCULATING DEPRECIATION EXPENSE
AND BOOK VALUE (continued from previous slide) page 424
20X2
Accumulated
Depreciation
$400.00
Original Cost
$1,250.00
20X3
+ Depreciation =
Expense
+
$200.00
=
Accumulated
–
=
Depreciation
–
$600.00
=
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
20X3
Accumulated
Depreciation
$600.00
Ending
Book Value
$650.00
LESSON 14-1
24
ANALYZING AND RECORDING ADJUSTMENTS
FOR DEPRECIATION EXPENSE
page 425
3
2
3
1
1. Write the debit amounts.
2. Write the credit amounts.
3. Label the adjustments.
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 14-1
LESSON 14-6
Calculating Federal
Income Tax and
Completing a Work Sheet
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
27
FEDERAL INCOME TAX EXPENSE
ADJUSTMENT
Total of Income Statement Credit column
Less total of Income Statement Debit column
before federal income tax
Equals Net Income before Federal Income Tax
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
page 427
$ 500,253.10
–396,049.91
$ 104,203.19
LESSON 14-1
28
CALCULATING FEDERAL INCOME TAX
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
page 428
LESSON 14-1
29
RECORDING THE FEDERAL INCOME TAX
page 429
ADJUSTMENT
3
1
1
1. Calculate the amount
of federal income tax
expense adjustment.
2
3
2. Total and rule the Adjustments
columns.
3. Extend account balances.
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 14-1
30
COMPLETING A WORK SHEET
page 430
1
1
2
4
1.
2.
3.
4.
5.
5
3
Total the Income Statement and Balance Sheet columns.
Calculate and enter the net income after federal income tax.
Extend the net income amount.
Calculate the column totals.
Rule double lines.
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 14-1
31
A COMPLETED 8-COLUMN
WORK SHEET
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
page 432
LESSON 14-1
32
A 10-COLUMN WORK SHEET
1
2
3
page 434-435
5
4
6
1.
2.
3.
4.
Trial balance
Adjustments
Extend adjusted balances
Total, prove, and rule
5. Extend balances
6. Calculate net income; total,
prove and rule
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 14-1