The post-closing trial balance of Storey Corporation at December 31, 2014, contains the following stockholders’ equity accounts.
|
Preferred Stock (15,000 shares issued) |
$750,000 |
|
Common Stock (250,000 shares issued) |
2,500,000 |
|
Paid-in Capital in Excess of Par–Preferred Stock |
250,000 |
|
Paid-in Capital in Excess of Par–Common Stock |
400,000 |
|
Common Stock Dividends Distributable |
250,000 |
|
Retained Earnings |
1,042,000 |
A review of the accounting records reveals the following.
- No errors have been made in recording 2014 transactions or in preparing the closing entry for net income.
- Preferred stock is $50 par, 6%, and cumulative; 15,000 shares have been outstanding since January 1, 2013.
- Authorized stock is 20,000 shares of preferred, 500,000 shares of common with a $10 par value.
- The January 1 balance in Retained Earnings was $1,170,000.
- On July 1, 20,000 shares of common stock were issued for cash at $16 per share.
- On September 1, the company discovered an understatement error of $90,000 in computing depreciation in 2013. The net of tax effect of $63,000 was properly debited directly to Retained Earnings.
- A cash dividend of $250,000 was declared and properly allocated to preferred and common stock on October 1. No dividends were paid to preferred stockholders in 2013.
- 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.
- Net income for the year was $585,000.
- On December 31, 2014, the directors authorized disclosure of a $200,000 restriction of retained earnings for plant expansion. (Use Note X.)
Instructions
(a)Reproduce the Retained Earnings account (T-account) for 2014.
(b)Prepare a retained earnings statement for 2014.
(c)Prepare a stockholders’ equity section at December 31, 2014.
(d)Compute the allocation of the cash dividend to preferred and common stock.