Question

The post-closing trial balance of Sunland Corporation at December 31, 2020, contains the following stockholders' equity accounts. Preferred Stock (14,600 shares issued) Common Stock (242,000 shares issued) Paid-in Capital in Excess of Par-Preferred Stock Paid-in Capital in Excess of Par-Common Stock Common Stock Dividends Distributable Retained Earnings $730,000 2,420,000 242,000 383,000 242,000 909,770 A review of the accounting records reveals the following. 1. 2. 6. No errors have been made in recording 2020 transactions or in preparing the closing entry for net income. Preferred stock is $50 par, 6%, and cumulative; 14,600 shares have been outstanding since January 1, 2019. Authorized stock is 19,600 shares of preferred, 484,000 shares of common with a $10 par value. The January 1 balance in Retained Earnings was $1,100,000. On July 1, 21,900 shares of common stock were issued for cash at $18 per share. On September 1, the company discovered an understatement error of $90,900 in computing salaries and wages expense in 2019. The net of tax effect of $63,630 was properly debited directly to Retained Earnings. A cash dividend of $242,000 was declared and properly allocated to preferred and common stock on October 1. No dividends were paid to preferred stockholders in 2019. On December 31, a 10% common stock dividend was declared out of retained earnings on common stock when the market price per share was $18. Net income for the year was $551,000. On December 31, 2020, the directors authorized disclosure of a $201,000 restriction of retained earnings for plant expansion. (Use Note X.) 7. 8. 9. 10.

Answer 1

Solution:

JU 32 33 34 35 36 37 Retained Earnings Account Correction of understatement error 63630 Beg. balance Cash dividend 242000 Net income stock dividend (242000*10%*$18) 435600 1100000 551000 38 40 Ending balance 909770 41 44 45 46 49 50 51 53 54 55 56 57 58 59 60 61 62 63 64 65 67 68 69 70 et170 ) Sheet171 Sheet107 (27)) Sheet173 Sheet174