Salt & Pepper, Inc., had retained earnings at the beginning of the current year

Q: Salt & Pepper, Inc., had retained earnings at the beginning of the current year

Solution: statement of retained earnings Particulars Amount Balance at the beginning $460,000 Add: net income during the year $250,000 Less: Dividend Preffered stock (current year) ($10,000) Preffered stock (arrears for 1 year) ($10,000) Common stock ($100,000) Less: overstated income ($65,000) Balance at the end $525,000

ID: 2398664 • Letter: S

Question

Salt & Pepper, Inc., had retained earnings at the beginning of the current year of $460,000. During the year, the company earned net income of $250,000 and declared dividends as follows.

$1 per share for the current-year dividend on the 10,000 shares of preferred stock outstanding.

$1 per share for the dividend in arrears for one year on the 10,000 shares of preferred stock outstanding.

$0.50 per share for the current-year dividend on the 200,000 shares of common stock outstanding.

In addition, the company discovered an overstatement in the prior year’s net income of $65,000 and corrected that error in the current year.

Prepare a statement of retained earnings for the year.

Explanation / Answer

Solution: statement of retained earnings

Particulars Amount Balance at the beginning $460,000 Add: net income during the year $250,000 Less: Dividend Preffered stock (current year) ($10,000) Preffered stock (arrears for 1 year) ($10,000) Common stock ($100,000) Less: overstated income ($65,000) Balance at the end $525,000

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Salt & Pepper, Inc., had retained earnings at the beginning of the current year

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