Ask Me Help Desk - Retained Earnings T Account

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Preferred Stock (15,000 shares issued) $750,000

Common Stock (240,300 shares issued) 3,364,200

Paid-in Capital in Excess of Par—Preferred Stock 247,800

Paid-in Capital in Excess of Par—Common Stock 409,900

Common Stock Dividends Distributable 336,420

Retained Earnings 915,450

A review of the accounting records reveals the following.

1. No errors have been made in recording 2014 transactions or in preparing the closing entry for net income.

2. Preferred stock is $50 par, 6%, and cumulative; 15,000 shares have been outstanding since January 1, 2013.

3. Authorized stock is 20,000 shares of preferred, 480,600 shares of common with a $14 par value.

4. The January 1 balance in Retained Earnings was $1,127,700.

5. On July 1, 20,000 shares of common stock were issued for cash at $16 per share.

6. On September 1, the company discovered an understatement error of $87,500 in computing depreciation in 2013. The net of tax effect of $61,250 was properly debited directly to Retained Earnings.

7. A cash dividend of $336,420 was declared and properly allocated to preferred and common stock on October 1. No dividends were paid to preferred stockholders in 2013.

8. On December 31, a 10% common stock dividend was declared out of retained earnings on common stock when the market price per share was $16.

9. Net income for the year was $569,900.

10. On December 31, 2014, the directors authorized disclosure of a $194,500 restriction of retained earnings for plant expansion. (Use Note X.)

Preferred Stock (15,000 shares issued)		$750,000
Common Stock (240,300 shares issued)		3,364,200
Paid-in Capital in Excess of Par—Preferred Stock		247,800
Paid-in Capital in Excess of Par—Common Stock		409,900
Common Stock Dividends Distributable		336,420
Retained Earnings		915,450

1.		No errors have been made in recording 2014 transactions or in preparing the closing entry for net income.
2.		Preferred stock is $50 par, 6%, and cumulative; 15,000 shares have been outstanding since January 1, 2013.
3.		Authorized stock is 20,000 shares of preferred, 480,600 shares of common with a $14 par value.
4.		The January 1 balance in Retained Earnings was $1,127,700.
5.		On July 1, 20,000 shares of common stock were issued for cash at $16 per share.
6.		On September 1, the company discovered an understatement error of $87,500 in computing depreciation in 2013. The net of tax effect of $61,250 was properly debited directly to Retained Earnings.
7.		A cash dividend of $336,420 was declared and properly allocated to preferred and common stock on October 1. No dividends were paid to preferred stockholders in 2013.
8.		On December 31, a 10% common stock dividend was declared out of retained earnings on common stock when the market price per share was $16.
9.		Net income for the year was $569,900.
10.		On December 31, 2014, the directors authorized disclosure of a $194,500 restriction of retained earnings for plant expansion. (Use Note X.)