Question

1. Prepare a retained earnings statement for the year. Ending balance $566,000 2. Prepare a stockholders'...

1. Prepare a retained earnings statement for the year.

Ending balance $566,000

2. Prepare a stockholders' equity section at December 31, 2017.

Total stockholders' equity $2,898,000

The stockholders' equity accounts of Karp Company at January 1, 2017, 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 2017, the company had the following transactions and events.

July

1

Declared a $0.60 cash dividend per share on common stock.

Aug.

1

Discovered $25,000 understatement of depreciation expense in 2016. (Ignore income taxes.)

Sept.

1

Paid the cash dividend declared on July 1.

Dec.

1

Declared a 15% stock dividend on common stock when the market price of the stock was $18 per share.

Dec

15

Declared a 6% cash dividend on preferred stock payable January 15, 2018.

Dec

31

Determined that net income for the year was $355,000.

Dec

31

Recognized a $200,000 restriction of retained earnings for plant expansion.

Homework Answers

Answer #1

Statement of retained earnings :

Beginning retained earnings 800000
Less: Prior period adjustment -25000
Retained earnings Adjusted 775000
Add: Net income 355000
Less: Dividend -132000
Less; Stock dividend -432000
Ending retained earnings 566000

Stockholder's equity

Common Stock
Common Stock, $5 par 800000
Common Stock dividend distributable 120000

Paid-in Capital in Excess of Par—Common Stock

612000 1532000
Preferred Stock
Preferred Stock, 6%, $50 par 600000
Paid-in Capital in Excess of Par—Preferred Stock 200000 800000
Total Paid in capital 2332000
Retained earnings 566000
Total Stockholder's equity 2898000
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