The stockholders’ equity accounts of Gonzalez, Inc., at January 1, 2017, are as
ID: 2533671 • Letter: T
Question
The stockholders’ equity accounts of Gonzalez, Inc., at January 1, 2017, are as follows. Preferred Stock, no par, 4,800 shares issued $480,000 Common Stock, no par, 100,000 shares issued 500,000 Retained Earnings 580,000 During 2017, the company had the following transactions and events. July 1 Declared a $0.50 cash dividend per share on common stock. Aug. 1 Discovered a $67,000 overstatement of 2016 depreciation expense. (Ignore income taxes.) Sept. 1 Paid the cash dividend declared on July 1. Dec. 1 Declared a 10% stock dividend on common stock when the market price of the stock was $12 per share. 15 Declared a $8 per share cash dividend on preferred stock, payable January 31, 2018. 31 Determined that net income for the year was $360,000.
Explanation / Answer
Adjusted net income=
Net income before adjustment $360,000
Add:Overstated depreciation $67,000
10% stock dividend
It will be treated as retained earnings
(MP-FV)*100000 $2,00,000
Gross Total $6,27,000
Less:
Dividend payout
$0.5 on common stock
(500000*.5%) $2500
Preferred stock
($8*4800) $38,400
Adjusted Net Income $586,100
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