Early in 2015, Robbinsville Press was organized with authorization to issue 100,000 shares of $100 par value preferred stock and 500,000 shares of $1 par value common stock. Ten thousand shares of the preferred stock were issued at par, and 170,000 shares of common stock were sold for $15 per share. The preferred stock pays an 8 percent cumulative dividend.

During the first four years of operations (2015 through 2018), the corporation earned a total of $1,385,000 and paid dividends of 75 cents per share in each year on its outstanding common stock.

Required:

a.Prepare the stockholders' equity section of the balance sheet at December 31, 2018. Include a supporting schedule showing your computation of the amount of retained earnings reported. (Hint: Income increases retained earnings, whereas dividends decrease retained earnings.)

b.Are there any dividends in arrears on the company's preferred stock at December 31, 2018?