Newland Company reported retained earnings at December 31, 2014, of $310,000. Ne
ID: 2462806 • Letter: N
Question
Newland Company reported retained earnings at December 31, 2014, of $310,000. Newland had 200,000 shares of common stock outstanding at the beginning of 2015. The following transactions occurred during 2015.
1. An error was discovered. In 2013, depreciation expense was recorded at $70,000, but the correct amount was $50,000. 2. A cash dividend of $0.50 per share was declared and paid. 3. A 5% stock dividend was declared and distributed when the market price per share was $15 per share. 4.Net income was $285,000.
Explanation / Answer
Newland Company
Retained Earnings Statement
For the Year Ended December 31, 2015
Balance, January 1, as reported
$310,000.00
Correction for understatement of 2013 net income
$20,000.00
Balance, January 1, as adjusted
$330,000.00
Add: Net income
$285,000.00
$615,000.00
Less: Dividends
Cash dividends
(200,000 * $0.50)
$100,000.00
Stock dividends
(200,000 * 0.05 * $15)
$150,000.00
Balance, December 31
$365,000.00
Balance, January 1, as reported
$310,000.00
Correction for understatement of 2013 net income
$20,000.00
Balance, January 1, as adjusted
$330,000.00
Add: Net income
$285,000.00
$615,000.00
Less: Dividends
Cash dividends
(200,000 * $0.50)
$100,000.00
Stock dividends
(200,000 * 0.05 * $15)
$150,000.00
Balance, December 31
$365,000.00