P12-5B On December 31, 2007, Bradstrom Company had 1,500,000 shares of $10 par common

Price: $3.99


P12-5B On December 31, 2007, Bradstrom Company had 1,500,000 shares of $10 par common
stock issued and outstanding.The stockholders’ equity accounts at December 31, 2007, had
the following balances.

Common Stock $15,000,000
Additional Paid-in Capital 1,500,000
Retained Earnings 900,000

Transactions during 2008 and other information related to stockholders’ equity accounts were
as follows.

1. On January 10, 2008, Bradstrom issued at $105 per share 100,000 shares of $100 par value,
7% cumulative preferred stock.

2. On February 8, 2008, Bradstrom reacquired 15,000 shares of its common stock for $16 per
share.

3. On June 8, 2008, Bradstrom declared a cash dividend of $1 per share on the common stock
outstanding, payable on July 10, 2008, to stockholders of record on July 1, 2008.

4. On December 15, 2008, Bradstrom declared the yearly cash dividend on preferred stock,
payable January 10, 2009, to stockholders of record on December 15, 2008.

5. Net income for the year is $3,600,000.

6. It was discovered that depreciation expense had been overstated in 2007 by $80,000.

Instructions

(a) Prepare a retained earnings statement for the year ended December 31, 2008.

(b) Prepare the stockholders’ equity section of Bradstrom’s balance sheet at December 31, 2008.