1. The company earned net income of $77,000. 2. A material error in net income from a previous period was corrected. This error correction increased retained earnings by $7,630 after related income taxes of $3,270. 3. Cash dividends totaling $12,500 and stock dividends totaling $18,000 were declared. 4. One thousand shares of callable preferred stock that originally had been issued at $105 per share were recalled and retired at the beginning of 2016 for the call price of $115 per share. 5. Treasury stock (common) was acquired at a cost of $17,000. State law requires a restriction of retained earnings in an equal amount. The company reports its retained earnings restrictions in a note to the financial statements. Required: 1. Prepare a statement of retained earnings for the year ended December 31, 2016. ROLT COMPANY Statement of Retained Earnings For Year Ended December 31, 2016 Retained earnings, as previously reported, January 1, 2016 Add: Correction due to understatement of previous income Adjusted retained earnings, January 1, 2016 Add: Net income Less: Cash dividends Less: Stock dividends Less: Reduction due to retirement of preferred stock Retained earnings, December 31, 2016 10,000 X 19,500 X 5,000 X 135,000 X 8,120 X 143,120 X 88,000 X 231,120 X 34,500 X 196,620 X
1. The company earned net income of $77,000. 2. A material error in net income from a previous period was corrected. This error correction increased retained earnings by $7,630 after related income taxes of $3,270. 3. Cash dividends totaling $12,500 and stock dividends totaling $18,000 were declared. 4. One thousand shares of callable preferred stock that originally had been issued at $105 per share were recalled and retired at the beginning of 2016 for the call price of $115 per share. 5. Treasury stock (common) was acquired at a cost of $17,000. State law requires a restriction of retained earnings in an equal amount. The company reports its retained earnings restrictions in a note to the financial statements. Required: 1. Prepare a statement of retained earnings for the year ended December 31, 2016. ROLT COMPANY Statement of Retained Earnings For Year Ended December 31, 2016 Retained earnings, as previously reported, January 1, 2016 Add: Correction due to understatement of previous income Adjusted retained earnings, January 1, 2016 Add: Net income Less: Cash dividends Less: Stock dividends Less: Reduction due to retirement of preferred stock Retained earnings, December 31, 2016 10,000 X 19,500 X 5,000 X 135,000 X 8,120 X 143,120 X 88,000 X 231,120 X 34,500 X 196,620 X
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Transcribed Image Text:1. The company earned net income of $77,000.
2. A material error in net income from a previous period was corrected. This error correction increased retained earnings by $7,630 after related
income taxes of $3,270.
3. Cash dividends totaling $12,500 and stock dividends totaling $18,000 were declared.
4. One thousand shares of callable preferred stock that originally had been issued at $105 per share were recalled and retired at the beginning of
2016 for the call price of $115 per share.
5. Treasury stock (common) was acquired at a cost of $17,000. State law requires a restriction of retained earnings in an equal amount. The
company reports its retained earnings restrictions in a note to the financial statements.
Required:
1. Prepare a statement of retained earnings for the year ended December 31, 2016.
ROLT COMPANY
Statement of Retained Earnings
For Year Ended December 31, 2016
Retained earnings, as previously reported, January 1, 2016
Add: Correction due to understatement of previous income
Adjusted retained earnings, January 1, 2016
Add: Net income
Less: Cash dividends
Less: Stock dividends
Less: Reduction due to retirement of preferred stock
Retained earnings, December 31, 2016
10,000 X
19,500 X
5,000 X
135,000 X
8,120 X
143,120 X
88,000 X
231,120 X
34,500 X
196,620 X
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