the statement of retained earnings of gary larson publishers is presented below:\ngary larson…

the statement of retained earnings of gary larson publishers is presented below:\ngary larson publishers\nstatement of retained earnings\nfor the year ended december 31, 2024\n($ in millions)\nretained earnings, january 1 $210\nadd: net income 78\ndeduct: cash dividend (22)\nstock dividend (1 million shares of $1 par common stock) (13)\nproperty dividend (garfield company preferred stock held as a short - term investment) (10)\nsale of treasury stock (cost $50 million) (8)\nretained earnings, december 31 $235\nrequired:\nfor the transactions that affected larsons retained earnings, reconstruct the journal entries that can be used to determine cash flows to be reported in a statement of cash flows.\nnote: if no entry is required for a transaction/event, select \no journal entry required\ in the first account field. enter your answers in millions (i.e., 10,000,000 should be entered as 10).

the statement of retained earnings of gary larson publishers is presented below:\ngary larson publishers\nstatement of retained earnings\nfor the year ended december 31, 2024\n($ in millions)\nretained earnings, january 1 $210\nadd: net income 78\ndeduct: cash dividend (22)\nstock dividend (1 million shares of $1 par common stock) (13)\nproperty dividend (garfield company preferred stock held as a short - term investment) (10)\nsale of treasury stock (cost $50 million) (8)\nretained earnings, december 31 $235\nrequired:\nfor the transactions that affected larsons retained earnings, reconstruct the journal entries that can be used to determine cash flows to be reported in a statement of cash flows.\nnote: if no entry is required for a transaction/event, select \no journal entry required\ in the first account field. enter your answers in millions (i.e., 10,000,000 should be entered as 10).

Answer

Explanation:

Step1: Record net - income addition

Net income increases retained earnings. The journal entry is to debit Income Summary (which is closed to Retained Earnings) and credit Retained Earnings. Debit: Income Summary 78 Credit: Retained Earnings 78

Step2: Record cash dividend

Cash dividends reduce retained earnings. The journal entry is to debit Retained Earnings and credit Cash. Debit: Retained Earnings 22 Credit: Cash 22

Step3: Record stock dividend

Stock dividends reduce retained earnings. For a $1 - par common stock dividend of 1 million shares, the journal entry is to debit Retained Earnings and credit Common Stock (at par value) and Additional - Paid - In Capital (if any, not given here just par value). Debit: Retained Earnings 13 Credit: Common Stock 13

Step4: Record property dividend

Property dividends reduce retained earnings. Debit Retained Earnings and credit the investment account (Garfield Company preferred stock). Debit: Retained Earnings 10 Credit: Investment in Garfield Company Preferred Stock 10

Step5: Sale of treasury stock

The sale of treasury stock does not affect retained earnings directly. So, No journal entry required for retained - earnings impact on this transaction for the purpose of this problem.

Answer:

Transaction Debit Account (in millions) Credit Account (in millions)
Net income Income Summary 78 Retained Earnings 78
Cash dividend Retained Earnings 22 Cash 22
Stock dividend Retained Earnings 13 Common Stock 13
Property dividend Retained Earnings 10 Investment in Garfield Company Preferred Stock 10
Sale of treasury stock No journal entry required No journal entry required