Chapter 16 Homework (Application) eBook Comprehensive Oakwood Inc. is a public enterprise whose shares are traded in the over-the-counter market. At December 31, 2018, Oakwood had 6,000,000 authorized shares of $10 par value common stock, of which 2,000,000 shares were issued and outstanding. The shareholders' equity accounts at December 31, 2018, had the following balances: Common stock Additional paid-in capital on common stock $20,000,000 7,500,000 6,470,000 Retained earnings Transactions during 2019 and other information relating to the shareholders' equity accounts were as follows: 1. On January 5, 2019, Oakwood issued at $54 per share, 100,000 shares of $50 par value, 9%, cumulative convertible preferred stock. Each share of preferred stock is convertible, at the option of the holder, into 2 shares of common stock. Oakwood had 600,000 authorized shares of preferred stock. 2. On February 2, 2019, Oakwood reacquired 20,000 shares of its common stock for $16 per share. Oakwood uses the cost method to account for treasury stock. 3. On April 27, 2019, Oakwood sold 500,000 shares (previously unissued) of $10 par value common stock to the public at $17 per share. 4. On June 18, 2019, Oakwood declared a cash dividend of $1 per share of common stock, payable on July 13, 2019, to shareholders of record on July 2, 2019. 5. On November 9, 2019, Oakwood sold 10,000 shares of treasury stock for $21 per share. 6. On December 14, 2019, Oakwood declared the yearly cash dividend on preferred stock, payable on January 14, 2020, to shareholders of record on December 31, 2019, 7. On January 18, 2020, before the books were closed for 2019, Oakwood became aware that the ending inventories at December 31, 2018, were understated by $300,000 (the after-tax effect on 2018 net income was $21 The appropriate correcting entry was recorded the same day. 8. After correcting the beginning inventory, net income for 2019 was $4,500,000. Required: 1. Prepare a statement of retained earnings for Oakwood for the year ended December 31, 2019. Assume that only single-period financial statements for 2019 are presented. OAKWOOD, INC. Statement of Retained Earnings For the Year Ended December 31, 2019 Balance, December 31, 2018, as originally reported Add: Prior period adjustment from error understating inventories at December 31, 2018 6,470,000 300,000 90,000 Less: Income tax effect 210,000 6,680,000 As restated 4,500,000 Add: Net income Previous Check My Work this conant for Grading Less: Income tax effect 90,000 As restated 210,000 Add: Net income 6,680,000 4,500,000 $ 11,180,000 Deduct cash dividends: Less: Cash dividends on preferred stock 450,000 Less: Cash dividends on common stock 2,480,000 2,930,000 Balance, December 31, 2019 8,250,000 Feedback 2. Prepare the shareholders' equity section of Oakwood's balance sheet at December 31, 2019. OAKWOOD, INC. Shareholders' Equity Section of Balance Sheet December 31, 2019 Contributed Capital: Preferred stock, $50 par value, 9% cumulative, convertible $ Common stock, $10 par value Additional paid-in capital on preferred stock Additional paid-in capital on common stock Retained earnings 8,250,000 Total contributed capital and retained earnings Less: Common stock in treasury Total shareholders' equity