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Retained Earnings Statement

Rolt Company began 2016 with a $135,000 balance in retained earnings. During the year, the following events occurred:

1. The company earned net income of $78,000.
2. A material error in net income from a previous period was corrected. This error correction increased retained earnings by $9,800 after related income taxes of $4,200.
3. Cash dividends totaling $10,000 and stock dividends totaling $18,500 were declared.
4. One thousand shares of callable preferred stock that originally had been issued at $115 per share were recalled and retired at the beginning of 2016 for the call price of $120 per share.
5. Treasury stock (common) was acquired at a cost of $23,000. 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 the 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		$

Answer 1

Answer:

ROLT COMPANY

Statement of Retained Earnings

For Year Ended December 31, 2016

Retained Earnings, as previously reported, January 1, 2016		135,000
Add: Correction due to the understatement of previous income		9,800
Adjusted Retained Earnings, January 1, 2016		144,800
Add: Net Income		78,000
		222,800
Less: Cash Dividend	10,000
Less: Stock Dividend	18,500
Less: Reduction due to retirement of Preferred Stock	5,000	33,500
Retained Earnings, December 31, 2016		189,300