Retained Earnings Statement Rolt Company began 2013 with a 145,000 balance in re

Question

Retained Earnings Statement

Rolt Company began 2013 with a 145,000 balance in retained earnings. During the year, the following events occurred:

1. The company earned net income of $75,000.

2. A material error in net income from a previous period was corrected. The error correction increased in retained earning by $7,350 after related income taxes of $3,150.

3. Cash dividents totaling $13,500 and the stock dividents totaling $18,500 were declared.

4. One thousand shares of callable preferred stock that originally had been issued at $105 per share were recalled and retired at the beginning of 2013 for the call price of $110 per share.

5. Treasury stock (common) was aquired at the cost of $18,000. 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.

Explanation / Answer

Retained earning statement

Particulars Amount( in$)

Retained earning as previously reported. 145000

Add: effect of correction(net of taxes). 7350

Corrected beginning RE. 152350

Add: Net income. 75000

227350

Less:Dividend (32000)

Less: recall of shares (5000)

Less :acquisition of stock. (18000)

Closing Retained earnings. 172350

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