P14-3A The post-closing trial balance of Violet Corporation at December 31, 2012, contains

the following stockholders’ equity accounts.

(a) Reproduce the Retained Earnings account for 2012.

Solution:

Retained Earnings account

Sept. 1 Prior Per. Adj. 63,000 Jan. 1 Balance 1,170,000

Oct. 1 Cash Dividend 250,000 Dec. 31 Net Income 585,000

Dec. 31 Stock Dividend 400,000

Dec. 31 Balance 1,042,000

b) Prepare a retained earnings statement for 2012.

Solution
Violet Corporation
Retained Earnings Statement
For the Year Ended December 31, 2012

Balance, January 1, as reported $1,170,000

Correction of overstatement of 2007 net
income because of understatement of
depreciation (63,000)

Balance, January 1, as adjusted 1,107,000

Add: Net income 585,000

1,692,000

Less: Cash dividends $250,000

Stock dividends 400,000 650,000
Balance, December 31 $1,042,000

c) Prepare a stockholders’ equity section at December 31, 2012.

Solution
Violet Corporation
stockholders’ equity section
For the Year Ended December 31, 2012

Stockholders’ equity
Paid-in capital
Capital stock
6% Preferred stock,
$50 par value, cumulative,
20,000 shares authorized,
15,000 shares issued and
Outstanding $ 750,000
Common stock, $10 par value,
500,000 shares authorized,
250,000 shares issued and
Outstanding $2,500,000
Common stock dividends
Distributable 250,000 2,750,000
Total capital stock 3,500,000
Additional paid-in capital
In excess of par value preferred stock 250,000
In excess of par value common stock 400,000
Total additional paid-in capital 650,000
Total paid-in capital 4,150,000
Retained earnings 1,042,000
Total stockholders’ equity $5,192,000
(d) Compute the allocation of the cash dividend to preferred and common
stock.
Solution:
15,000 X $3 = $45,000

$585,000 – $45,000 = $2.25

240,000

(e) Compute the earnings per share of common stock using 240,000 as the weighted-
average
shares outstanding for the year.
Solution:

Total cash dividend $250,000

Allocated to preferred stock
Dividend in arrears—2007 $45,000
(15,000 X $3)
2008 dividend 45,000 90,000
Remainder to common stock $160,000
P14-4A On January 1, 2012, Saa Corporation had the following
stockholders’ equity accounts. Common Stock (no par value, 90,000
shares issued and outstanding) $1,400,000
Retained Earnings 500,000.
During the year, the following transactions occurred

Prepare the stockholders’ equity section of the balance sheet at:

(a) March 31
Solution
Saa Corporation
Partial Balance Sheet
March 31, 2012

Stockholders’ equity
Paid-in capital
Capital stock
Common stock, no-par value,
90,000 shares issued and outstanding. $1,400,000
Retained earnings 410,000
Total stockholders’ equity $1,810,000

(b) June 30,

Solution
Saa Corporation
Partial Balance Sheet
June 30, 2012

Stockholders’ equity
Paid-in capital
Capital stock
Common stock, no-par value,
360,000 shares issued and outstanding. $1,400,000
Retained earnings 410,000
Total stockholders’ equity $1,810,000
 c) September 30,

Solution:
Saa Corporation
Partial Balance Sheet
September 30, 2012

Stockholders’ equity
Paid-in capital
Capital stock
Common stock, no-par value,
378,000 shares issued and outstanding $1,634,000
Retained earnings 176,000

Total stockholders’ equity $1,810,000

(c)December 31, 2012.

Solution

Saa Corporation
Partial Balance Sheet
December 31, 2012
Stockholders’ equity
Paid-in capital
Capital stock
Common stock, no-par value,
378,000 shares issued and outstanding $1,634,000
Retained earnings 337,000

Total stockholders’ equity $1,971,000