prepare a retained earnings statement for the year 581391

The stockholders’ equity accounts of Falk Company at January 1, 2012, 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 2012, the company had the following transactions and events.

July

1

Declared a $0.50 cash dividend on common stock.

Aug.

1

Discovered $25,000 understatement of 2011 depreciation on equipment. Ignore income

taxes.

Sept.

1

Paid the cash dividend declared on July 1.

Dec.

1

Declared a 10% stock dividend on common stock when the market value of the stock

was $18 per share.

15

Declared a 6% cash dividend on preferred stock payable January 15, 2013.

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 entry.

(b) Enter the beginning balances in the accounts, and post to the stockholders’ equity accounts.

(c) Prepare a retained earnings statement for the year.

(d) Prepare a stockholders’ equity section at December 31, 2012.