The ledger of Giffin Corporation at December 31, 2014, after the books have been closed, contains the following stockholders' equity accounts.
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Preferred Stock (10,000 shares issued)
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$1,000,000
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Common Stock (400,000 shares issued)
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2,000,000
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Paid-in Capital in Excess of Par—Preferred Stock
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200,000
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Paid-in Capital in Excess of Stated Value—Common Stock
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1,180,000
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Common Stock Dividends Distributable
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200,000
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Retained Earnings
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2,560,000
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A review of the accounting records reveals the following.
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1.
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No errors have been made in recording 2014 transactions or in preparing the closing entry for net income.
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2.
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Preferred stock is 6%, $100 par value, noncumulative, and callable at $125. Since January 1, 2013, 10,000 shares have been outstanding; 20,000 shares are authorized.
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3.
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Common stock is no-par with a stated value of $5 per share; 600,000 shares are authorized.
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4.
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The January 1 balance in Retained Earnings was $2,450,000.
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5.
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On October 1, 100,000 shares of common stock were sold for cash at $8 per share.
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6.
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A cash dividend of $500,000 was declared and properly allocated to preferred and common stock on November 1. No dividends were paid to preferred stockholders in 2013.
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7.
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On December 31, a 10% common stock dividend was declared out of retained earnings on common stock when the market price per share was $9.
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8.
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Net income for the year was $970,000.
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9.
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On December 31, 2014, the directors authorized disclosure of a $100,000 restriction of retained earnings for plant expansion. (Use Note A.)
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Instructions:
Reproduce the Retained Earnings account (T-account) for 2014.
Prepare a retained earnings statement for 2014.
Prepare a stockholders' equity section at December 31, 2014. Total stockholders' equity $7,140,000
Compute the allocation of the cash dividend to preferred and common stock.