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Cory Company’s shareholders’ equity on January 1, 2019, is a follows: In January 2019, Cory recalled and retired the 8% preferred stock. This stock originally had been issued for $105 per share. In April, it declared and issued a 10% stock; dividend on the common stock; the stock was then selling for $16 per share. This was the only issuance of common or preferred stock during the year. During November, Cory reacquired as treasury stock 1,000 shares of its common stock at $18 per share (it uses the cost method for treasury stock). State law requires a restriction of retained earnings equal to the cost of all treasury shares held. Cory discloses this restriction by means of a note to the financial statements. In December, the annual cash dividends on the outstanding preferred stock and a $1 per share cash dividend on the outstanding common stock were declared and paid. At the end of December, net income of $87,000 was closed from Income Summary to Retained Earnings. During the year-end audit, it was found that two errors had been made during 2018 for both financial reporting and income tax reporting. First, depreciation on certain machinery in the amount of $10,000 was inadvertently omitted. Second, a mathematical mistake was made in the calculation of the accumulated depreciation related to the sale of equipment. Consequently, the reduction in accumulated depreciation and the amount of the gain recognized were both understated by $8,000. Roth errors are considered material. Cory has been subject to a 30% income tax rate for the past several years. Required: 1. Prepare journal entries to record the preceding transactions. 2. Prepare Cory's statement of retained earnings and any related notes to its financial statements for the year ended December 31, 2019.

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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
Publisher: Cengage Learning
ISBN: 9781337788281
BuyFind

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
Publisher: Cengage Learning
ISBN: 9781337788281

Solutions

Chapter
Section
Chapter 16, Problem 16P
Textbook Problem

Cory Company’s shareholders’ equity on January 1, 2019, is a follows:

Chapter 16, Problem 16P, Cory Companys shareholders equity on January 1, 2019, is a follows: In January 2019, Cory recalled

In January 2019, Cory recalled and retired the 8% preferred stock. This stock originally had been issued for $105 per share. In April, it declared and issued a 10% stock; dividend on the common stock; the stock was then selling for $16 per share. This was the only issuance of common or preferred stock during the year. During November, Cory reacquired as treasury stock 1,000 shares of its common stock at $18 per share (it uses the cost method for treasury stock). State law requires a restriction of retained earnings equal to the cost of all treasury shares held. Cory discloses this restriction by means of a note to the financial statements. In December, the annual cash dividends on the outstanding preferred stock and a $1 per share cash dividend on the outstanding common stock were declared and paid. At the end of December, net income of $87,000 was closed from Income Summary to Retained Earnings. During the year-end audit, it was found that two errors had been made during 2018 for both financial reporting and income tax reporting. First, depreciation on certain machinery in the amount of $10,000 was inadvertently omitted. Second, a mathematical mistake was made in the calculation of the accumulated depreciation related to the sale of equipment. Consequently, the reduction in accumulated depreciation and the amount of the gain recognized were both understated by $8,000. Roth errors are considered material. Cory has been subject to a 30% income tax rate for the past several years.

Required:

  1. 1. Prepare journal entries to record the preceding transactions.
  2. 2. Prepare Cory's statement of retained earnings and any related notes to its financial statements for the year ended December 31, 2019.

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Intermediate Accounting: Reporting And Analysis
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