The post-closing trial balance of Storey Corporation at December 31, 2017, conta
ID: 2609659 • Letter: T
Question
The post-closing trial balance of Storey Corporation at December 31, 2017, contains the following stockholders' equity accounts. Preferred Stock (15,800 shares issued) Common Stock (260,000 shares issued) Paid-in Capital in Excess of Par-Preferred Stock Paid-in Capital in Excess of Par-Common Stock Common Stock Dividends Distributable Retained Earnings $790,000 2,600,000 260,000 388,000 260,000 992,320 A review of the accounting records reveals the following 1. No errors have been made in recording 2017 transactions or in preparing the closing entry for net income 3. 4. 5. 6. Preferred stock is $50 par, 696, and cumulative; 15,800 shares have been outstanding since January 1, 2016. Authorized stock is 20,800 shares of preferred, 520,000 shares of common with a $10 par value The January 1 balance in Retained Earnings was $1,190,000. On July 1, 19,400 shares of common stock were issued for cash at $18 per share On September 1, the company discovered an understatement error of $92,400 in computing salaries and wages expense in 2016. The net of tax effect of $64,680 was properly debited directly to Retained Earnings. 7. A cash dividend of $260,000 was declared and properly allocated to preferred and common stock on October 1. No dividends were paid to preferred stockholders in 2016 B. On December 31, a 10% common stock dividend was declared out of retained earnings on common stock when the market price per share was $18. 9. Net income for the year was $595,000 10. On December 31, 2017, the directors authorized disclosure of a $208,000 restriction of retained earnings for plant expansion. (Use Note X.)Explanation / Answer
a. STOREY CORPORATION
Retained Earnings Statement
For the Year Ended December 31, 2017
Balance, January 1, as reported......................................... $1190000
Correction of overstatement of 2016 net
income because of understatement of
depreciation...................................................................... (64680)
Balance, January 1, as adjusted......................................... 1125320
Add: Net income................................................................ 595000
1720320
Less: Cash dividends.......................................................... $260000
Stock dividends...................................................... 388000
Balance, December 31......................................................... $1072320
(b) STOREY CORPORATION
Partial Balance Sheet
December 31, 2017
Stockholders’ equity
Paid-in capital
Capital stock
6% Preferred stock,
$50 par value, cumulative,
20800 shares authorized,
15800 shares issued and
outstanding............................................. $ 790000
Common stock, $10 par value,
520000 shares authorized,
260000 shares issued and
outstanding............................. $2600000
Common stock dividends
distributable............................ 260000 2860000
Total capital stock............................. 3650000
Additional paid-in capital
In excess of par value—
preferred stock......................... 260000
In excess of par value—
common stock.......................... 388000
Total additional paid-in
capital............................................ 648000
Total paid-in capital......................... 4298000
Retained earnings (see Note X).................................. 1072320
Total stockholders ‘equity ............................................................ $5370320
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