The stockholders' equity section of Lachlan corporation's balance sheet at December 31 is presented here.

Lachlan corporation

Balance Sheet (partial)

Stockholders' equity

Paid-in capital

Preferred stock, cumulative, 10,000 shares authorized, 6,000 shares issued and outstanding $600,000

Common stock, no par, 750,000 shares authorized, 580,000 shares issued 2,900,000

Total paid-in capital 3,500,000

Retained earnings 1,158,000

Total paid-in capital and retained earnings 4,658,000

Less: Treasury stock (6,000 common shares) 32,000

Total stockholders' equity $4,626,000

Question:

If dividends of $72,000 were in arrears on preferred stock, what would be the balance reported for retained earnings?

The answer is not $1,086,000.