Question

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.

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