In the unit 2 assignment, we will record transactions that impact the equity section of the balance sheet. Corporations raise capital by selling stock in the corporation. The stockholders equity section contains a common stock account and an additional paid-in capital account. When stock is sold, the common stock account is credited for the par value of the stock sold and the additional paid-in capital is credited for the amount greater than par. Corporations can also issue a class of stock which typically carries unique features. This stock is known as preferred stock. Finally, corporations can declare dividends during the accounting period. Dividends represent payouts of a corporations earnings. Dividends are declared by the corporations Board of Directors. Dividends can be in various forms including cash, property, liquidating, and stock dividends. You will provide the journal entry to record issuing of common stock shares by a corporation, record issuing of cumulative preferred stock, and record a declaration of stock split.

Part 2: Company B Company B began 2018 with a $110,000 balance in retained earnings. The following events occurred during the year:

Cash dividends of $18,500 were declared.

4,500 shares of callable preferred stock were recalled and retired for a price of $225 per share. The stock was originally issued for $150 per share.

Net income was $550,000.

A material error in net income for a previous period was corrected. The correction of the error decreased retained earnings by $18,500 after a related income tax. The following is required: 1. Prepare the statement of retained earnings for the year ended 2013, and any note disclosures separately. 2. Discuss the restriction of retained earnings that the board of directors can impose and why it would be necessary.