On December 31, 1996, K. Schipper Company had 1,000,000 shares of \(\$ 1\) par common stock issued and outstanding. The stockholders' equity accounts at December 31, 1996 have the following balances:

Transactions during 1997 and other information related to stockholders' equity accounts were as follows:
1. On January 9,1997 , Schipper issues at \(\$ 6\) per share 100,000 shares of \(\$ 5\) par value, \(8 \%\) cumulative preferred stock.
2. On February 8,1997 , Schipper reacquired 10,000 shares of its common stock for \(\$ 12\) per share.
3. On June 10, 1997, Schipper declared a cash dividend of \(\$ 1\) per share on the common stock outstanding, payable on July 10, 1997, to stockholders' of record on July 1, 1997.
4. On December 15, 1997, Schipper declared the yearly cash dividend on preferred stock, payable January 10, 1998 to stockholders of record on December 15, 1997.
5. Net income for the year is \(\$ 2,400,000\).
6. It was discovered that depreciation expense had been overstated in 1996 by \(\$ 100,000\).
\section*{Instructions}

(a) Prepare a retained earnings statement for the year ended December 31, 1997.

(b) Prepare the stockholders' equity section of Schipper's balance sheet at December 31, 1997.

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Common stock Additional paid in capital Retained earnings 1,000,000 500,000 700,000