Problem 14-2A The stockholders\' equity of Karp Company at January 1, 2014, are
ID: 2451028 • Letter: P
Question
Problem 14-2A
The stockholders' equity of Karp Company at January 1, 2014, are as follows.
There were no dividends in arrears on preferred stock. During 2014, the company had the following transactions and events.
July. 1 Declared a $0.50 cash dividend per share on common stock.
Aug. 1 Discovered $28,200 understatement of 2013 depreciation on equipment. (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 amrket price of the stock was $18 per share.
15 Declared a 6% cash dividend on preferred stock apyable January 15, 2015.
31 Determined that net income for the year was %315,700.
31 Recognized a $193,100 restriction of retained earnings for plant expansion.
A. Journalize the transactions, events, and closing entries for net income and dividends.
B. Enter the beginning balances i the accounts, and post to the stockholders' equity accounts.
C. Prepare a retained earnings statement for the year.
D. Prepare a stockholders's equity section at December 31, 2014.
Preferred Stock, 6%, $50 par $615,000 Common Stock, $7 par 1,134,000 Paid-in Capital in Excess of Par-Preferred Stock 198,400 Paid-in Capital in EXcess of Par- Common Stock 309,000 Retyained Earnings 797,000Explanation / Answer
July 1
Profit and Loss A/C Dr 226800
To dividend payable A/C 226800
Aug 1
Depreciation expense A/C Dr 28200
To Accumulated Depreciation A/C 28200
Sep 1
Dividend payable A/C Dr 226800
To Cash A/C 226800
Dec 1
Retained earnings A/C Dr 16200
To dividend payable A/C 16200