At the beginning of fiscal 1998 Jones Company had retained earnings of $1,000,000 and at the beginning of fiscal 1999 Jones Company had retained earnings of
$1,200,000. During fiscal 1998 Jones Company declared a dividend of $300,000 and declared a 3 for 1 stock split. How much did Jones Company earn during fiscal 1998?
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A. B. C. D.D
The company's retained earnings increased by $200,000 during 1998 and dividends were paid of $300,000, therefore earnings had to be $500,000. The stock split has no effect on retained earnings.
To calculate the earnings of Jones Company during fiscal 1998, we need to consider the changes in retained earnings and the dividend declared.
First, let's calculate the beginning retained earnings for fiscal 1998. The beginning retained earnings for fiscal 1998 is given as $1,000,000.
Next, we need to consider the impact of the 3-for-1 stock split. A stock split increases the number of shares outstanding while reducing the stock price proportionately. However, it does not affect the total value of the company or the retained earnings. Therefore, the stock split does not directly impact the earnings calculation.
Now, let's calculate the ending retained earnings for fiscal 1998. The beginning retained earnings for fiscal 1998 is $1,000,000, and at the beginning of fiscal 1999, the retained earnings are $1,200,000. The increase in retained earnings during fiscal 1998 is $1,200,000 - $1,000,000 = $200,000.
Finally, we need to consider the dividend declared during fiscal 1998. The dividend declared is given as $300,000.
To calculate the earnings, we need to subtract the dividend declared from the increase in retained earnings. Therefore, the earnings for fiscal 1998 are $200,000 - $300,000 = -$100,000.
The calculated earnings of -$100,000 indicate a net loss for the company during fiscal 1998. However, it's important to note that this is an unusual result. Earnings are typically positive, indicating a profit for the company. It's possible that there may be additional information or adjustments required to reconcile this result.
Based on the given answer choices, none of them match the calculated earnings. Therefore, the correct answer may not be available in the given options, or there may be a mistake in the question or answer choices. It's advisable to double-check the question and consult the exam provider for clarification.