The ledger of Paisley Corporation at December 31, 2014, after the books have been closed, contains the following stockholders’ equity accounts.

Preferred Stock (8,000 shares issued) $ 800,000 Common Stock (400,000 shares issued) 2,000,000 Paid-in Capital in Excess of Par—Preferred Stock 100,000 Paid-in Capital in Excess of Stated—Common Stock — 1,220,000 Common Stock Dividends Distributable 200,000 Retained Earnings 2,520,000 A review of the accounting records reveals the following.

1. No errors have been made in recording 2014 transactions or in preparing the closing entry for net income.

. Preferred stock is 8%, $100 par value, noncumulative, and callable at $125. Since January 1, 2013, 8,000 shares have been outstanding; 20,000 shares are authorized.

Common stock is no-par with a stated value of $5 per share; 600,000 shares are authorized.

. The January 1 balance in Retained Earnings was $2,450,000.

. On October 1, 100,000 shares of common stock were sold for cash at $8 per share.

. A cash dividend of $500,000 was declared and properly allocated to preferred and common stock on November 1. No dividends were paid to preferred stockholders in 20133 7. On December 31, a 10% common stock dividend was declared out of retained earnings on common stock when the market price per share was $10.

8. Net income for the year was $970,000.

9. On December 31, 2014, the directors authorized disclosure of a $100,000 restriction of retained earnings for plant expansion. (Use Note A.)

Instructions

(a) Reproduce the Retained Earnings account (T-account) for 2014.

(b) Prepare a retained earnings statement for 2014.

(c) Total stockholders’ equity

(c) Prepare a stockholders’ equity section at December 31, 2014.
$6,840,000

(d) Compute the allocation of the cash dividend to preferred and common stock.