The post-closing trial balance of Fortaleza Corporation at December 31, 2011, contains the following equity accounts. Share

Question:

The post-closing trial balance of Fortaleza at December 31, 2011, contains the following equity accounts.
Share Capital-Preference (15,000 shares issued) ......R$ 750,000
Share Capital-Ordinary (250,000 shares issued) ......2,500,000
Share Premium-Preference ................ 250,000
Share Premium-Ordinary ................... 400,000
Ordinary Share Dividends Distributable ........... 250,000
Retained Earnings .............................. 902,000
A review of the accounting records reveals the following.
1. No errors have been made in recording 2011 transactions or in preparing the closing entry for net income.
2. Preference shares are R$50 par, 8%, and cumulative; 15,000 shares have been outstanding since January 1, 2010.
3. Authorized shares arc 20,000 shares of preference, 500,000 shares of ordinary with a R$10 par value.
4. The January 1 balance in Retained Earnings was R$1,170,000.
5. On July 1, 20,000 ordinary shares were sold for cash at R$16 per share.
6. On September 1, the company discovered an understatement error of R$90,000 in computing depreciation in 2010. The net of tax effect of R$63,000 was properly debited directly to Retained Earnings.
7. A cash of R$250,000 was declared and properly allocated to preference and ordinary shares on October 1. No dividends were paid to preference shareholders in 2010.
8. On December 31, a 10% share was declared out of retained earnings on ordinary shares when the market price per share was R$18.
9. Net income for the year was R$495,000.
10. On December 31, 2011, the directors authorized disclosure of a R$200,000 restriction of retained earnings for plant expansion. (Use Note X.)

Instructions
(a) Reproduce the Retained Earnings account for the year.
(b) Prepare a retained earnings statement for the year.
(c) Prepare an equity section at December 31.
(d) Compute the earnings per share of ordinary shares using 240,000 as the weighted-average shares outstanding for the year.
(e) Compute the allocation of the cash to preference and ordinary shares.

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