The stockholders equity accounts of Karp Company at January 1, 2014, are as follows.

Preferred Stock, 6%, $50 par $600,000

Common Stock, $5 par 800,000

Paid-in Capital in Excess of ParPreferred Stock 200,000

Paid-in Capital in Excess of ParCommon Stock 300,000

Retained Earnings 800,000

There were no dividends in arrears on preferred stock. During 2014, the company had the following transactions and events.

July 1 Declared a $0.60 cash dividend per share on common stock.

Aug. 1 Discovered $25,000 understatement of 2013 depreciation on equipment. (Ignore income taxes.)

Sept. 1 Paid the cash dividend declared on July 1.

Dec. 1 Declared a 15% stock dividend on common stock when the market price of the stock was $18 per share.

Dec 15 Declared a 6% cash dividend on preferred stock payable January 15, 2015.

Dec 31 Determined that net income for the year was $355,000.

Dec 31 Recognized a $200,000 restriction of retained earnings for plant expansion.

Instructions

• Journalize the transactions, events, and closing entries for net income and dividends.
• Enter the beginning balances in the accounts, and post to the stockholders equity accounts. (Note: Open additional stockholders equity accounts as needed.)
• Prepare a retained earnings statement for the year.
• Prepare a stockholders equity section at December 31, 2014.