Corporation reported stockholders' equity on Dec 31 of the prior year as follows:

Common stock, $5 par value, 1,000,000 shares $2,500,000 authorized, 500,000 shares issued ----- 2,5000,000

Paid-in capital in excess of par, common stock ----1,000,000

Retained earnings-------3,000,000

The following selected transactions occurred during the current year:

Feb. 15 The board of directors declared a 7% stock dividend to stockholders of record on March 1, payable March 20. The stock was selling for $8 per share.

Mar. 9 Distributed the stock dividend.

May 1 A cash dividend of $0.50 per share was declared by the board of directors to stockholders of record on May 20, payable June 1.

June 1 Paid the cash dividend. Aug. 20 The board decided to split the stock 3-for-1, effective on September 1.

Sept. 1 Stock split 3-for-1.

Dec. 31 Earned a net income of $900,000 for the current year.

Prepare a statement of retained earnings as of Dec 31 of the current year