etained Earnings Statement Rolt Company began 2013 with a $140,000 balance in re
ID: 2494121 • Letter: E
Question
etained Earnings Statement
Rolt Company began 2013 with a $140,000 balance in retained earnings. During the year, the following events occurred:
1) The company earned net income of $85,000.
2) A material error in net income from a previous period was corrected. This error correction increased retained earnings by $7,000 after related income taxes of $3,000.
3) Cash dividends totaling $13,000 and stock dividends totaling $16,500 were declared.
4) One thousand shares of callable preferred stock that originally had been issued at $110 per share were recalled and retired at the beginning of 2013 for the call price of $115 per share.
5) Treasury stock (common) was acquired at a cost of $17,000. 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.
Prepare a statement of retained earnings for the year ended December 31, 2013.
Explanation / Answer
Retained Earnings, Beginning balance 140000 Plus: Correction in previous year 7000 Beginning Balance restated 147000 Plus: Net Income 85000 Total: 232000 Minus: Dividends Paid ($13000+16500) 29500 Retained Earnings, December 31, 2013 202500 Retirement of preferred stock 1000*5 5000 Retained earnings Ending balance 197500
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