Youve been hired to perform an audit of Hubbard Company for the year ended December 31, 2016. You find the following account balances related to shareholders equity:

Preferred stock, $100 par	$ 30,000
Common stock, $10 par	65,000
Capital surplus	(16,400)
Retained earnings	150,000

Because of the antiquated terminology and negative balance, you examine the Capital Surplus account first and find in it the following entries:

	Credit (Debit)
Additional paid-in capital on common stock	$ 27,100
Capital from donated land	16,000
Treasury stock (500 common shares at cost)	(7,500)
Additional paid-in capital on preferred stock	3,000
Stock dividend (50%)	(20,000)
Prior period adjustment (net of income taxes)	(12,000)
Loss from fire (uninsured), 2015	(18,000)
Property dividend declared	(6,000)
Cash dividends declared	(24,000)
Balance	($41,400)

Your examination of the Preferred Stock and Common Stock accounts reveals that the amounts shown correctly state the total par value of the issued capital stock. The Retained Earnings account contains the accumulated earnings of the company, with the exception of any items of retained earnings that were inappropriately debited or credited to the Capital Surplus account.

Required:

1.	Prepare whatever journal entries are necessary to eliminate the Capital Surplus account and to correct Hubbards shareholders equity accounts.
2.	Prepare a corrected shareholders equity section of Hubbards December 31, 2016, balance sheet. Include any related notes to its financial statements.

GENERAL JOURNAL

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Hubbard Company

Shareholders' Equity

December 31, 2016

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