On December 31, 2014, Andes Company had 1,500,000 shares of $10 par common stock issued and outstanding. The stockholders’ equity accounts at December 31, 2014, had the following balances.

Common Stock ...............$15,000,000

Additional Paid-in Capital .......... 1,500,000

Retained Earnings ............. 900,000

Transactions during 2015 and other information related to stockholders’ equity accounts were as follows.

1. On January 10, 2015, Andes issued at $105 per share 100,000 shares of $100 par value, 8% cumulative preferred stock.

2. On February 8, 2015, Andes reacquired 20,000 shares of its common stock for $14 per share.

3. On May 15, 2015, Andes declared the yearly cash dividend on preferred stock, payable June 10, 2015, to stockholders of record on May 15, 2015.

4. On June 8, 2015, Andes declared a cash dividend of $1 per share on the common stock outstanding, payable on July 10, 2015, to stockholders of record on July 1, 2015.

5. Net income for the year is $3,600,000.

6. It was discovered that depreciation expense had been understated in 2014 by $65,000.

Instructions

(a) Prepare a retained earnings statement for the year ended December 31, 2015.

(b) Prepare the stockholders’ equity section of Andes’ balance sheet at December 31, 2015.