The ledger of Reno Corporation at December 31, 1998, after the books have been closed, contains the following stockholders' equity accounts:

A review of the accounting records reveals this information:
1. Preferred stock is \(10 \%\), \(\$ 100\) par value, noncumulative, and callable at \(\$ 125\). Since January 1, 1997, 10,000 shares have been outstanding; 20,000 shares are authorized.
2. Common stock is no-par with a stated value of \(\$ 5\) per share; 600,000 shares are authorized.
3. The January 1 balance in Retained Earnings was \(\$ 2,200,000\).
4. On October \(1,100,000\) shares of common stock were sold for cash at \(\$ 8\) per share.
5. A cash dividend of \(\$ 400,000\) was declared and properly allocated to preferred and common stock on November 1. No dividends were paid to preferred stockholders in 1997.
6. On December 31 a \(5 \%\) common stock dividend was declared out of retained earnings on common stock when the market price per share was \(\$ 7\).
7. Net income for the year was \(\$ 880,000\).
8. On December 31, 1998, the directors authorized disclosure of a \(\$ 100,000\) restriction of retained earnings for plant expansion. (Use Note A.)
\section*{Instructions}

(a) Reproduce the retained earnings account ( \(\mathrm{T}\) account) for the year.

(b) Prepare the stockholders' equity section of the balance sheet at December 31.

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Preferred Stock (10,000 shares issued) Common Stock (400,000 shares issued) Paid-in Capital in Excess of Par Value-Preferred Stock Paid-in Capital in Excess of Stated Value-Common Stock Common Stock Dividends Distributable Retained Earnings $1,000,000 2,000,000 200,000 1,200,000 100,000 2,540,000