Homework SourseSalt Pepper Inc had retained earnings at the beginning of t
Salt & Pepper, Inc., had retained earnings at the beginning of the current year of $460,000. During the year, the company earned net income of $250,000 and declared dividends as follows.
$1 per share for the current-year dividend on the 10,000 shares of preferred stock outstanding.
$1 per share for the dividend in arrears for one year on the 10,000 shares of preferred stock outstanding.
$0.50 per share for the current-year dividend on the 200,000 shares of common stock outstanding.
In addition, the company discovered an overstatement in the prior year’s net income of $65,000 and corrected that error in the current year.
Prepare a statement of retained earnings for the year.
Solution
Solution: statement of retained earnings
| Particulars | Amount | |
| Balance at the beginning | $460,000 | |
| Add: | net income during the year | $250,000 |
| Less: | Dividend | |
| Preffered stock (current year) | ($10,000) | |
| Preffered stock (arrears for 1 year) | ($10,000) | |
| Common stock | ($100,000) | |
| Less: | overstated income | ($65,000) |
| Balance at the end | $525,000 |
