Comprehensive Dakota Corporation had the following shareholders' equity account balances at December 31, 2018: Preferred stock $1,800,000 Additional paid-in capital on preferred stock 90,000 Common stock 5,150,000 Additional paid-in capital on common stock 3,500,000 Retained earnings 4,000,000 Unrealized decrease in value of marketable equity securities 245,000 Treasury common stock 270,000 Transactions during 2019 and other information relating to the shareholders' equity accounts were as follows: Dakota's preferred and common shares are traded on the over-the-counter market. At December 31, 2018, Dakota had 100,000 authorized shares of $100 par, 10%, cumulative preferred stock; and 3,000,000 authorized shares of no-par common stock with a stated value of $5 per share. On January 9, 2019, Dakota formally retired all 30,000 shares of its treasury common stock and had them revert to an unissued basis. The treasury stock had been acquired on January 20, 2018. The shares were originally issued at $10 per share. Dakota owned 10,000 shares of Bush Inc. common stock purchased in 2016 for $750,000. The Bush stock was included in Dakota's short-term marketable securities portfolio at the end of 2018 at a value of $650,000. On February 13, 2019, Dakota declared a dividend in kind of 1 share of Bush for every 100 shares of Dakota common stock held by shareholders of record on February 27, 2019. The market price of Bush common stock was $63 per share on February 13, 2019. The dividend in kind was distributed on March 12, 2019. On April 2, 2019, 250,000 stock rights were issued to the common shareholders permitting the purchase of 1 new share of common stock in exchange for 1 right and $11 cash. On April 23, 2019, 210,000 stock rights were exercised when the market price of Dakota's common stock was $13 per share. Dakota issued new shares to settle the transaction. The remaining 40,000 rights were not exercised and expired. On December 10, 2019, Dakota declared the yearly cash dividend on preferred stock, payable on January 14, 2020, to shareholders of record on December 31, 2019. After the year-end adjustment, the Unrealized Decrease in Value of Marketable Equity Securities account had a debit balance of $135,000 at December 31, 2019. On January 14, 2020, before the accounting records were closed for 2019, Dakota became aware that rent income for the year ended December 31, 2018, was overstated by $500,000. The after-tax effect on 2018 net income was $275,000. The appropriate correcting entry was recorded the same day. After correcting the rent income, net income for 2019 was $2,600,000. Required: 1. Prepare Dakota's statement of retained earnings for the year ended December 31, 2019. Assume that only single-period financial statements for 2019 are presented. DAKOTA CORPORATION Statement of Retained Earnings For the Year Ended December 31, 2019 Balance, December 31, 2018, as originally reported $fill in the blank 6bab10024fae078_1 Less: Prior period adjustment from error overstating rent income $fill in the blank 6bab10024fae078_3 Less: Income tax effect fill in the blank 6bab10024fae078_5 fill in the blank 6bab10024fae078_6 As restated $fill in the blank 6bab10024fae078_7 Add: Net income fill in the blank 6bab10024fae078_9 $fill in the blank 6bab10024fae078_10 Deduct dividends: Cash dividend on preferred stock $fill in the blank 6bab10024fae078_12 Dividend in kind on common stock fill in the blank 6bab10024fae078_14 fill in the blank 6bab10024fae078_15 Balance, December 31, 2019 $fill in the blank 6bab10024fae078_16 2. Prepare the shareholders' equity section of Dakota's balance sheet at December 31, 2019. DAKOTA CORPORATION Shareholders' Equity Section of Balance Sheet December 31, 2019 Contributed Capital: Preferred stock, $100 par, 10% cumulative $fill in the blank a606fafee058f8c_2 Common stock, $5 stated value fill in the blank a606fafee058f8c_4 Additional paid-in capital: On preferred stock $fill in the blank a606fafee058f8c_6 On common stock fill in the blank a606fafee058f8c_8 From treasury stock fill in the blank a606fafee058f8c_10 Total additional paid-in capital fill in the blank a606fafee058f8c_11 Retained earnings fill in the blank a606fafee058f8c_13 Accumulated other comprehensive income (loss) Unrealized decrease in value of marketable equity securities fill in the blank a606fafee058f8c_15 Total shareholders' equity $fill in the blank a606fafee058f8c_16

Comprehensive Dakota Corporation had the following shareholders' equity account balances at December 31, 2018: Preferred stock $1,800,000 Additional paid-in capital on preferred stock 90,000 Common stock 5,150,000 Additional paid-in capital on common stock 3,500,000 Retained earnings 4,000,000 Unrealized decrease in value of marketable equity securities 245,000 Treasury common stock 270,000 Transactions during 2019 and other information relating to the shareholders' equity accounts were as follows: Dakota's preferred and common shares are traded on the over-the-counter market. At December 31, 2018, Dakota had 100,000 authorized shares of $100 par, 10%, cumulative preferred stock; and 3,000,000 authorized shares of no-par common stock with a stated value of $5 per share. On January 9, 2019, Dakota formally retired all 30,000 shares of its treasury common stock and had them revert to an unissued basis. The treasury stock had been acquired on January 20, 2018. The shares were originally issued at $10 per share. Dakota owned 10,000 shares of Bush Inc. common stock purchased in 2016 for $750,000. The Bush stock was included in Dakota's short-term marketable securities portfolio at the end of 2018 at a value of $650,000. On February 13, 2019, Dakota declared a dividend in kind of 1 share of Bush for every 100 shares of Dakota common stock held by shareholders of record on February 27, 2019. The market price of Bush common stock was $63 per share on February 13, 2019. The dividend in kind was distributed on March 12, 2019. On April 2, 2019, 250,000 stock rights were issued to the common shareholders permitting the purchase of 1 new share of common stock in exchange for 1 right and $11 cash. On April 23, 2019, 210,000 stock rights were exercised when the market price of Dakota's common stock was $13 per share. Dakota issued new shares to settle the transaction. The remaining 40,000 rights were not exercised and expired. On December 10, 2019, Dakota declared the yearly cash dividend on preferred stock, payable on January 14, 2020, to shareholders of record on December 31, 2019. After the year-end adjustment, the Unrealized Decrease in Value of Marketable Equity Securities account had a debit balance of $135,000 at December 31, 2019. On January 14, 2020, before the accounting records were closed for 2019, Dakota became aware that rent income for the year ended December 31, 2018, was overstated by $500,000. The after-tax effect on 2018 net income was $275,000. The appropriate correcting entry was recorded the same day. After correcting the rent income, net income for 2019 was $2,600,000. Required: 1. Prepare Dakota's statement of retained earnings for the year ended December 31, 2019. Assume that only single-period financial statements for 2019 are presented. DAKOTA CORPORATION Statement of Retained Earnings For the Year Ended December 31, 2019 Balance, December 31, 2018, as originally reported $fill in the blank 6bab10024fae078_1 Less: Prior period adjustment from error overstating rent income $fill in the blank 6bab10024fae078_3 Less: Income tax effect fill in the blank 6bab10024fae078_5 fill in the blank 6bab10024fae078_6 As restated $fill in the blank 6bab10024fae078_7 Add: Net income fill in the blank 6bab10024fae078_9 $fill in the blank 6bab10024fae078_10 Deduct dividends: Cash dividend on preferred stock $fill in the blank 6bab10024fae078_12 Dividend in kind on common stock fill in the blank 6bab10024fae078_14 fill in the blank 6bab10024fae078_15 Balance, December 31, 2019 $fill in the blank 6bab10024fae078_16 2. Prepare the shareholders' equity section of Dakota's balance sheet at December 31, 2019. DAKOTA CORPORATION Shareholders' Equity Section of Balance Sheet December 31, 2019 Contributed Capital: Preferred stock, $100 par, 10% cumulative $fill in the blank a606fafee058f8c_2 Common stock, $5 stated value fill in the blank a606fafee058f8c_4 Additional paid-in capital: On preferred stock $fill in the blank a606fafee058f8c_6 On common stock fill in the blank a606fafee058f8c_8 From treasury stock fill in the blank a606fafee058f8c_10 Total additional paid-in capital fill in the blank a606fafee058f8c_11 Retained earnings fill in the blank a606fafee058f8c_13 Accumulated other comprehensive income (loss) Unrealized decrease in value of marketable equity securities fill in the blank a606fafee058f8c_15 Total shareholders' equity $fill in the blank a606fafee058f8c_16

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter16: Retained Earnings And Earnings Per Share

Section: Chapter Questions

Problem 10MC

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Comprehensive

Dakota Corporation had the following shareholders' equity account balances at December 31, 2018:

Preferred stock	$1,800,000
Additional paid-in capital on preferred stock	90,000
Common stock	5,150,000
Additional paid-in capital on common stock	3,500,000
Retained earnings	4,000,000
Unrealized decrease in value of marketable equity securities	245,000
Treasury common stock	270,000

Transactions during 2019 and other information relating to the shareholders' equity accounts were as follows:

Dakota's preferred and common shares are traded on the over-the-counter market. At December 31, 2018, Dakota had 100,000 authorized shares of $100 par, 10%, cumulative preferred stock; and 3,000,000 authorized shares of no-par common stock with a stated value of $5 per share.
On January 9, 2019, Dakota formally retired all 30,000 shares of its treasury common stock and had them revert to an unissued basis. The treasury stock had been acquired on January 20, 2018. The shares were originally issued at $10 per share.
Dakota owned 10,000 shares of Bush Inc. common stock purchased in 2016 for $750,000. The Bush stock was included in Dakota's short-term marketable securities portfolio at the end of 2018 at a value of $650,000. On February 13, 2019, Dakota declared a dividend in kind of 1 share of Bush for every 100 shares of Dakota common stock held by shareholders of record on February 27, 2019. The market price of Bush common stock was $63 per share on February 13, 2019. The dividend in kind was distributed on March 12, 2019.
On April 2, 2019, 250,000 stock rights were issued to the common shareholders permitting the purchase of 1 new share of common stock in exchange for 1 right and $11 cash. On April 23, 2019, 210,000 stock rights were exercised when the market price of Dakota's common stock was $13 per share. Dakota issued new shares to settle the transaction. The remaining 40,000 rights were not exercised and expired.
On December 10, 2019, Dakota declared the yearly cash dividend on preferred stock, payable on January 14, 2020, to shareholders of record on December 31, 2019.
After the year-end adjustment, the Unrealized Decrease in Value of Marketable Equity Securities account had a debit balance of $135,000 at December 31, 2019.
On January 14, 2020, before the accounting records were closed for 2019, Dakota became aware that rent income for the year ended December 31, 2018, was overstated by $500,000. The after-tax effect on 2018 net income was $275,000. The appropriate correcting entry was recorded the same day.
After correcting the rent income, net income for 2019 was $2,600,000.

Required:

1. Prepare Dakota's statement of retained earnings for the year ended December 31, 2019. Assume that only single-period financial statements for 2019 are presented.

DAKOTA CORPORATION
Statement of Retained Earnings
For the Year Ended December 31, 2019
Balance, December 31, 2018, as originally reported		$fill in the blank 6bab10024fae078_1
Less: Prior period adjustment from error overstating rent income	$fill in the blank 6bab10024fae078_3
Less: Income tax effect	fill in the blank 6bab10024fae078_5	fill in the blank 6bab10024fae078_6
As restated		$fill in the blank 6bab10024fae078_7
Add: Net income		fill in the blank 6bab10024fae078_9
		$fill in the blank 6bab10024fae078_10
Deduct dividends:
Cash dividend on preferred stock	$fill in the blank 6bab10024fae078_12
Dividend in kind on common stock	fill in the blank 6bab10024fae078_14	fill in the blank 6bab10024fae078_15
Balance, December 31, 2019		$fill in the blank 6bab10024fae078_16

2. Prepare the shareholders' equity section of Dakota's balance sheet at December 31, 2019.

DAKOTA CORPORATION
Shareholders' Equity Section of Balance Sheet
December 31, 2019
Contributed Capital:
Preferred stock, $100 par, 10% cumulative		$fill in the blank a606fafee058f8c_2
Common stock, $5 stated value		fill in the blank a606fafee058f8c_4
Additional paid-in capital:
On preferred stock	$fill in the blank a606fafee058f8c_6
On common stock	fill in the blank a606fafee058f8c_8
From treasury stock	fill in the blank a606fafee058f8c_10
Total additional paid-in capital		fill in the blank a606fafee058f8c_11
Retained earnings		fill in the blank a606fafee058f8c_13
Accumulated other comprehensive income (loss)
Unrealized decrease in value of marketable equity securities		fill in the blank a606fafee058f8c_15
Total shareholders' equity		$fill in the blank a606fafee058f8c_16

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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