The stockholders' equity accounts of Holmes Inc., at January 1, 2010, are as follows.
Preferred Stock, $100 par, 7% ............. $600,000
Common Stock, $10 par ................ 900,000
Paid-in Capital in Excess of Par Value-Preferred Stock .... 100,000
Paid-in Capital in Excess of Par Value-Common Stock ... 200,000
Retained Earnings ................... 500,000
There were no dividends in arrears on preferred stock. During 2010, the company had the following transactions and events.
July 1 Declared a $0.50 cash dividend on common stock.
Aug. 1 Discovered a $72,000 overstatement of 2009 depreciation. Ignore income taxes.
Sept. 1 Paid the cash dividend declared on July 1.
Dec. 1 Declared a 10% stock dividend on common stock when the market value of the stock was $16 per share.
15 Declared a 7% cash dividend on preferred stock payable January 31, 2011.
31 Determined that net income for the year was $350,000.
Instructions
(a) Journalize the transactions and the closing entry for net income.
(b) Enter the beginning balances in the accounts and post to the stockholders' equity accounts.
(c) Prepare a retained earnings statement for the year.
(d) Prepare a stockholders' equity section at December 31, 2010.