The Tate Company began 2007 with a Retained Earnings account balance of $180,000. During 2007 the following
Question:
The Tate Company began 2007 with a Retained Earnings account balance of $180,000. During 2007 the following eight events occurred and were properly recorded by the company:
1. Bonds payable with a face value of $100,000 were issued on January 1 at 98. The bonds mature in 10 years. The bond provisions require the restriction of retained earnings (by means of a note to the financial statements) equal to one-half the face value of the bonds during the period the bonds are outstanding.
2. On April 13 the company reissued 2,400 shares of treasury stock for $25 per share. The company had reacquired these shares in 2005 at a cost of $20 per share. At that time, it had restricted retained earnings (by means of a note to the financial statements) in an amount equal to the cost of the treasury shares.
3. On January 5 the company recalled and retired 800 shares of $100 par preferred stock at the call price of $120 per share. The stock had originally been issued for $108 per share.
4. During June the company declared and issued a two-for-one stock split on its common stock, reducing the par value from $10 to $5 per share. Immediately prior to the split, 10,000 shares of common stock were outstanding. The stock market price on the date of the split was $25 per share.
5. In August the company declared and issued a 15% stock dividend when the common stock was selling at $13 per share.
6. During December the company declared and paid its annual $1.30 per share cash dividend on the outstanding common stock.
7. Net income amounted to $72,000.
8. During the year-end audit, it was found that in 2006 the company had recorded depreciation on a particular machine twice. The error resulted in a $13,000 overstatement of depreciation during 2006. It was also found that, due to an oversight, a $10,000 loss on the sale of land was omitted from the 2006 income statement. Both items are material. The company has been subject to a 30% income tax rate for several years.
Required
Prepare Tate Company’s statement of retained earnings and any related notes to its financial statements for the year ended December 31, 2007.
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial... Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on... Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their... Face Value
Face value is a financial term used to describe the nominal or dollar value of a security, as stated by its issuer. For stocks, the face value is the original cost of the stock, as listed on the certificate. For bonds, it is the amount paid to the... Par Value
Par value is the face value of a bond. Par value is important for a bond or fixed-income instrument because it determines its maturity value as well as the dollar value of coupon payments. The market price of a bond may be above or below par,...
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TATE COMPANY Statement of Retained Earnings For Year Ended December 31 2007 Retained earnings as ...View the full answer
Intermediate Accounting
ISBN: 978-0324300987
10th Edition
Authors: Loren A Nikolai, D. Bazley and Jefferson P. Jones
