On December 31, 2005, Bradstrom Company had 1.500,000 shares of $10 par common stock issued and outstanding. The stockholders' equity accounts at December 31, 2005, had the following balances.

Transactions during 2006 and other information related to stockholders' equity accounts were as follows.
1. On January 10, 2006, Bradstrom issued at $105 per share lOO.OOO shares of $100 par value.
7% cumulative preferred stock.
2. On February 8, 2006, Bradstrom reacquired 15.000 shares of its common stock for $16 per share.
3. On June 8. 2006. Bradstrom declared a cash dividend of $1 per share on the common siock outstanding, payable on July 10, 2006, to stockholders of record on July 1. 2006.
4. On December 15, 2006. Bradstrom declared the yearh cash dividend on preferred stock, payable January 10. 2007. to stockholders of record on December 15. 2006.
5. Net income tor the year is $3,600,000.
6. It was discovered that depreciation expense had been overstated m 2005 by $80,000.
Instructions

(a) Prepare a retained earnings statement for the year ended December 31. 2006.

(b) Prepare the stockholders' equitj section of Bradstrom's balance sheet at December 31,2006.

Transcribed Image Text:

Common Stock Additional Paid-in Capital Retained Earnings $15,000,000 1,500,000 900,000