SETUP: Newland Company reported retained earnings at December 31, 2016, of $302,
ID: 2463419 • Letter: S
Question
SETUP: Newland Company reported retained earnings at December 31, 2016, of $302,500. Newland had 206,500 shares of common stock outstanding at the beginning of 2017. The following transactions occurred during 2017:
1. An error was discovered. In 2015, depreciation expense was recorded at $68,000, but the correct amount was $46,000.
2. A cash dividend of $0.55 per share was declared and paid.
3. A 5% stock dividend was declared and distributed when the market price per share was $16 per share. 4. Net income was $287,000.
Prepare a retained earnings statement for 2017. (List items that increase retained earnings first.)
Explanation / Answer
Net Income = $ 287,000
Add: Excess Depreciation recorded (68000-46000) = $ 22,000
Less: Cash Dividend (206500*0.55) = $ 113,575
Retained earnings for the period 2017 = $ 195.425
Add: Opening retained earnings = $ 302,500
Total retained earnings = $ 497,925
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