The stockholders’ equity accounts of Karp Company at January 1, 2014, are as follows.
|
Preferred Stock, 6%, $50 par |
$600,000 |
|
Common Stock, $5 par |
800,000 |
|
Paid-in Capital in Excess of Par—Preferred Stock |
200,000 |
|
Paid-in Capital in Excess of Par—Common Stock |
300,000 |
|
Retained Earnings |
800,000 |
There were no dividends in arrears on preferred stock. During 2014, the company had the following transactions and events.
|
July |
1 |
Declared a $0.60 cash dividend per share on common stock. |
|
1 |
Discovered $25,000 understatement of 2013 depreciation on equipment. (Ignore income taxes.) |
|
|
1 |
Paid the cash dividend declared on July 1. |
|
|
1 |
Declared a 15% stock dividend on common stock when the market price of the stock was $18 per share. |
|
|
15 |
Declared a 6% cash dividend on preferred stock payable January 15, 2015. |
|
|
31 |
Determined that net income for the year was $355,000. |
|
|
31 |
Recognized a $200,000 restriction of retained earnings for plant expansion. |
Instructions
(a)Journalize the transactions, events, and closing entries for net income and dividends.
(b)Enter the beginning balances in the accounts, and post to the stockholders’ equity accounts. (Note:Open additional stockholders’ equity accounts as needed.)
(c)Prepare a retained earnings statement for the year.
(d)Prepare a stockholders’ equity section at December 31, 2014.