The postclosing trial balance of Storey Corporation at Decem

The post-closing trial balance of Storey Corporation at December 31, 2017, contains the following stockholders\' equity accounts. Preferred Stock (15,800 shares issued) Common Stock (260,000 shares issued) Paid-in Capital in Excess of Par-Preferred Stock Paid-in Capital in Excess of Par-Common Stock Common Stock Dividends Distributable Retained Earnings $790,000 2,600,000 260,000 388,000 260,000 992,320 A review of the accounting records reveals the following 1. No errors have been made in recording 2017 transactions or in preparing the closing entry for net income 3. 4. 5. 6. Preferred stock is $50 par, 696, and cumulative; 15,800 shares have been outstanding since January 1, 2016. Authorized stock is 20,800 shares of preferred, 520,000 shares of common with a $10 par value The January 1 balance in Retained Earnings was $1,190,000. On July 1, 19,400 shares of common stock were issued for cash at $18 per share On September 1, the company discovered an understatement error of $92,400 in computing salaries and wages expense in 2016. The net of tax effect of $64,680 was properly debited directly to Retained Earnings. 7. A cash dividend of $260,000 was declared and properly allocated to preferred and common stock on October 1. No dividends were paid to preferred stockholders in 2016 B. On December 31, a 10% common stock dividend was declared out of retained earnings on common stock when the market price per share was $18. 9. Net income for the year was $595,000 10. On December 31, 2017, the directors authorized disclosure of a $208,000 restriction of retained earnings for plant expansion. (Use Note X.)

Solution

a.                                       STOREY CORPORATION

                                                               Retained Earnings Statement

                                                      For the Year Ended December 31, 2017

                                                                                                                                                                       

          Balance, January 1, as reported.........................................             $1190000

          Correction of overstatement of 2016 net

          income because of understatement of

          depreciation......................................................................                 (64680)

          Balance, January 1, as adjusted.........................................             1125320

          Add:   Net income................................................................                 595000

                                                                                                                     1720320

          Less: Cash dividends..........................................................               $260000                               

                         Stock dividends......................................................               388000                                  

          Balance, December 31.........................................................             $1072320

(b)                                                           STOREY CORPORATION

                                                                  Partial Balance Sheet

                                                                   December 31, 2017

                                                                                                                                                                      

         Stockholders’ equity

                  Paid-in capital

                           Capital stock

                                    6% Preferred stock,

                                    $50 par value, cumulative,

                                    20800 shares authorized,

                                    15800 shares issued and

                                    outstanding.............................................              $ 790000

Common stock, $10 par value,

                                     520000 shares authorized,

                                     260000 shares issued and

                                     outstanding............................. $2600000                             

                                     Common stock dividends

                                     distributable............................    260000              2860000

                                              Total capital stock.............................               3650000

                            Additional paid-in capital

                                     In excess of par value—

                                     preferred stock......................... 260000                             

                                     In excess of par value—

                                     common stock.......................... 388000                             

                                              Total additional paid-in

                                              capital............................................                   648000

                                              Total paid-in capital.........................                4298000

                   Retained earnings (see Note X)..................................                 1072320

                                             

Total stockholders ‘equity ............................................................               $5370320