Thursday, 1 January 2015

The post-closing trial balance of Violet Corporation at December 31, 2012, contains the following stockholders’ equity accounts.

The post-closing trial balance of Violet Corporation at December 31, 2012, contains the following stockholders’ equity accounts.

Preferred Stock (15,100 shares issued)
$ 755,000
Common Stock (259,600 shares issued)
2,855,600
Paid-in Capital in Excess of Par—Preferred Stock
250,300
Paid-in Capital in Excess of Par—Common Stock
388,300
Common Stock Dividends Distributable
285,560
Retained Earnings
1,016,830


A review of the accounting records reveals the following.

1.
No errors have been made in recording 2012 transactions or in preparing the closing entry for net income.
2.
Preferred stock is $50 par, 6%, and cumulative; 15,100 shares have been outstanding since January 1, 2011.
3.
Authorized stock is 20,100 shares of preferred, 519,200 shares of common with a $11 par value.
4.
The January 1 balance in Retained Earnings was $1,186,900.
5.
On July 1, 18,700 shares of common stock were issued for cash at $16 per share.
6.
On September 1, the company discovered an understatement error of $90,500 in computing depreciation in 2011. The net of tax effect of $63,350 was properly debited directly to Retained Earnings.
7.
A cash dividend of $285,560 was declared and properly allocated to preferred and common stock on October 1. No dividends were paid to preferred stockholders in 2011.
8.
On December 31, a 10% common stock dividend was declared out of retained earnings on common stock when the market price per share was $16.
9.
Net income for the year was $594,200.
10.
On December 31, 2012, the directors authorized disclosure of a $202,900 restriction of retained earnings for plant expansion. (Use Note X.)



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Prepare a stockholders’ equity section at December 31, 2012. (For preferred stock, common stock and treasury stock enter the account name only and do not provide the descriptive information provided in the question.)

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Note X: Retained earnings is restricted for plant expansion, $202,900.
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Explanation
(d)
Total cash dividend


$285,560


Allocated to preferred stock





    Dividend in arrears—2011 [15,100 x ($50 x 6%)]
$45,300



    2012 dividend
45,300

90,600


Remainder to common stock


$194,960

(e)
$594,200 – $45,300*
$2.20


249,600

*15,100 x $50 x 6% = $45,300