ACCT 320 Prepare the statement of retained earnings
- pany A that they are entitled to.
- Company A is formed as a corporation and therefore, its shareholders have limited liability. Limited liability means that stockholders can only lose the amount of their investment. Discuss how this limited liability affects a corporation.
Company B began 2013 with a $110,000 balance in retained earnings. The following events occurred during the year:
- Cash dividends of $18,500 were declared.
- 4,500 shares of callable preferred stock were recalled and retired for a price of $225 per share. The stock was originally issued for $150 per share.
- Net income was $550,000.
- A material error in net income for a previous period was corrected. The correction of the error decreased retained earnings by $18,500 after a related income tax.
The following is required:
- Prepare the statement of retained earnings for the year ended 2013, and any note disclosures separately.
- Discuss the restriction of retained earnings that the board of directors can impose and why it would be necessary.