Purpose: (L.O. 6) This exercise will illustrate the preparation of a retained earnings statement.
On January 1, 2014, Kimmie Corporation had a balance of $300,000 in its Retained Earnings account. During 2014, Kimmie had the following selected transactions:
- Declared cash dividends of $40,000.
- Declared stock dividends of $60,000.
- Corrected understatement of 2013 net income because of an error in computing depreciation expense, $32,000.
- Earned net income of $50,000.
- Sold treasury stock for a price that was $6,000 below its cost. There were no previous sales of treasury stock. The cost method is used to account for treasury stock.
Prepare the retained earnings statement for Kimmie Corporation for the year ending December 31, 2014.