On January 1, 2019, Kittson Company had a retained earnings balance of $218,600 It is subject to a 30 corporate income tax rate During 2019, Kittson earned net income of $67,000, and the following events occurred 1 Cash dividends of $3 per share on 4,000 shares of common stock were declared and paid 2 A small stock dividend was declared and issued The dividend consisted of 600 shares of $10 par common stock On the date of declaration, the market price of the companys common stock was $36 per share 3 The company recalled and retired 500 shares of $100 par preferred stock The call price was $125 per share the stock had originally been issued for $110 per share 4 The company discovered that it had erroneously recorded depreciation expense of $45,000 in 2018 for both financial reporting and income tax reporting The correct depreciation for 2018 should have been $20,000 This is considered a material error Required 1 Prepare journal entries to record Items 1 through 4 2 Prepare Kittsons statement of retained earnings for the year ended December 31, 2019 CHART OF ACCOUNTSKittson CompanyGeneral Ledger ASSETS 111 Cash 121 Accounts Receivable 141 Inventory 152 Prepaid Insurance 181 Equipment 189 Accumulated Depreciation LIABILITIES 211 Accounts Payable 231 Salaries Payable 250 Unearned Revenue 261 Income Taxes Payable on Prior Earnings 271 Dividends Payable EQUITY 305 Preferred Stock 311 Common Stock 315 Common Stock to be Distributed 321 Additional Paid in Capital on Preferred Stock 324 Additional Paid in Capital from Stock Dividend 331 Retained Earnings REVENUE 411 Sales Revenue EXPENSES 500 Cost of Goods Sold 511 Insurance Expense 512 Utilities Expense 521 Salaries Expense 532 Bad Debt Expense 540 Interest Expense 541 Depreciation Expense 559 Miscellaneous Expenses 910 Income Tax Expense Amount Descriptions Adjusted retained earnings, January 1, 2019 Cash dividends Correction of overstatement in 2018 depreciation expense, net Net income Reduction of retained earnings due to retirement of preferred stock Retained earnings, as previously reported, January 1, 2019 Retained earnings, December 31, 2019 Stock dividend

The Answer is in the image, click to view ...

Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Jul 09, 2024

On January 1, 2019, Kittson Company had a retained earnings balance of $218,600. It is subject to a 30% corporate income tax rate. During 2019,

On January 1, 2019, Kittson Company had a retained earnings balance of $218,600. It is subject to a 30% corporate income tax rate. During 2019, Kittson earned net income of $67,000, and the following events occurred:

1.	Cash dividends of $3 per share on 4,000 shares of common stock were declared and paid.
2.	A small stock dividend was declared and issued. The dividend consisted of 600 shares of $10 par common stock. On the date of declaration, the market price of the companys common stock was $36 per share.
3.	The company recalled and retired 500 shares of $100 par preferred stock. The call price was $125 per share; the stock had originally been issued for $110 per share.
4.	The company discovered that it had erroneously recorded depreciation expense of $45,000 in 2018 for both financial reporting and income tax reporting. The correct depreciation for 2018 should have been $20,000. This is considered a material error.

Required:

1.	Prepare journal entries to record Items 1 through 4.
2.	Prepare Kittsons statement of retained earnings for the year ended December 31, 2019

CHART OF ACCOUNTSKittson CompanyGeneral Ledger

	ASSETS
111	Cash
121	Accounts Receivable
141	Inventory
152	Prepaid Insurance
181	Equipment
189	Accumulated Depreciation

	LIABILITIES
211	Accounts Payable
231	Salaries Payable
250	Unearned Revenue
261	Income Taxes Payable on Prior Earnings
271	Dividends Payable

	EQUITY
305	Preferred Stock
311	Common Stock
315	Common Stock to be Distributed
321	Additional Paid-in Capital on Preferred Stock
324	Additional Paid-in Capital from Stock Dividend
331	Retained Earnings

	REVENUE
411	Sales Revenue

	EXPENSES
500	Cost of Goods Sold
511	Insurance Expense
512	Utilities Expense
521	Salaries Expense
532	Bad Debt Expense
540	Interest Expense
541	Depreciation Expense
559	Miscellaneous Expenses
910	Income Tax Expense

Amount Descriptions
Adjusted retained earnings, January 1, 2019
Cash dividends
Correction of overstatement in 2018 depreciation expense, net
Net income
Reduction of retained earnings due to retirement of preferred stock
Retained earnings, as previously reported, January 1, 2019
Retained earnings, December 31, 2019
Stock dividend