the post closing trial balance of fernetti corporation at decemb 265246

The post closing trial balance of Fernetti Corporation at December 31, 2010, contains these stockholders’ equity accounts.

Preferred Stock (8,000 shares issued) ……………………………$400,000

Common Stock (350,000 shares issued) …………………………3,500,000

Paid in Capital in Excess of Par Value—Preferred Stock …………250,000

Paid in Capital in Excess of Par Value—Common Stock …………700,000

Retained Earnings …………………………………………………915,000

A review of the accounting records reveals this information:

1. Preferred stock is $50 par, 10%, and cumulative; 8,000 shares have been outstanding since January 1, 2009.

2. Authorized stock is 20,000 shares of preferred and 500,000 shares of common with a $10 par value.

3. The January 1, 2010, balance in Retained Earnings was $660,000.

4. On July 1, 20,000 shares of common stock were sold for cash at $16 per share.

5. A cash dividend of $220,000 was declared and properly allocated to preferred and common stock on October 1. No dividends were paid to preferred stockholders in 2009.

6. Net income for the year was $475,000.

7. On December 31, 2010, the directors authorized disclosure of a $150,000 restriction of retained earnings for plant expansion. (Use Note X.)

Instructions

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

(b) Prepare the stockholders’ equity section of the balance sheet at December 31.