1. The company earned net income of $77,000. 2. A material error in net income from a previous period was corrected. This error correction increased retained earnings by $7,630 after related income taxes of $3,270. 3. Cash dividends totaling $12,500 and stock dividends totaling $18,000 were declared. 4. One thousand shares of callable preferred stock that originally had been issued at $105 per share were recalled and retired at the beginning of 2016 for the call price of $115 per share. 5. Treasury stock (common) was acquired at a cost of $17,000. State law requires a restriction of retained earnings in an equal amount. The company reports its retained earnings restrictions in a note to the financial statements. Required: 1. Prepare a statement of retained earnings for the year ended December 31, 2016. ROLT COMPANY Statement of Retained Earnings For Year Ended December 31, 2016 Retained earnings, as previously reported, January 1, 2016 Add: Correction due to understatement of previous income Adjusted retained earnings, January 1, 2016 Add: Net income 135,000 X 8,120 X 143,120 X 88,000 X 231,120 X Less: Cash dividends 10,000 X Less: Stock dividends 19,500 X Less: Reduction due to retirement of preferred stock 5,000 X 34,500 X Retained earnings, December 31, 2016 196,620 X