The ledger of Reno Corporation at December 31, 1996, after the books have been closed, contains the following stockholders' equity accounts:

A review of the accounting records reveals the following:
1. No errors have been made in recording 1996 transactions or in preparing the closing entry for net income.
2. Preferred stock is \(10 \% \$ 100\) par value, non-cumulative, and callable at \(\$ 125\). Since January \(1,1995,10,000\) shares have been outstanding; 20,000 shares are authorized.
3. Common stock is no-par with a stated value of \(\$ 5\) per share; 600,000 shares are authorized.
4. The January 1 balance in Retained Earnings was \(\$ 2,200,000\).
5. On October \(1,100,000\) shares of common stock were sold for cash at \(\$ 8\) per share.
6. A cash dividend of \(\$ 400,000\) was declared and properly allocated to preferred and common stock on November 1. No dividends were paid to preferred stockholders in 1995.
7. On December 31, a \(5 \%\) common stock dividend was declared out of retained earnings on common stock when the market price per share was \(\$ 7\).
8. Net income for the year was \(\$ 880,000\).
9. On December 31, 1996, the directors authorized disclosure of a \(\$ 100,000\) restriction of retained earnings for plant expansion. (Use Note A.)
\section*{Instructions}

(a) Reproduce the retained earnings account ( \(T\) account) for the year.

(b) Prepare a retained earnings statement for the year.

(c) Prepare a stockholders' equity section at December 31.

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Preferred Stock (10,000 shares issued) Common Stock (400,000 shares issued) Paid-in Capital in Excess of Par Value-Preferred Paid-in Capital in Excess of Par Value Common Common Stock Dividends Distributable Retained Earnings $1,000,000 2,000,000 200,000 1,200,000 100,000 2,540,000