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The post-closing trial balance of Harmon Corporation as of December 31, 2020, contains the following stockholders equity accounts.

Preferred Stock (15,000 shares issued) - $750,000

Common Stock (250,000 shares issued) - 2,500,000

Paid-in Capital in Excess of Par-Preferred Stock - 250,000

Paid-in Capital in Excess of Par-Common Stock - 400,000

Common Stock Dividends Distributable - 250,000

Retained Earnings - ???

The following items were revealed during a review of the accounting records.

a. No errors were made during the recording of 2020 transactions of in preparing the closing entry for net income.

b. Preferred stock is $50 par value, 6% and is cumulative. 15,000 shares have been outstanding since January 1, 2018.

c. Authorized stock is 20,000 shares of preferred, 500,000 share of common with a $10 par value.

d. The January 1 balance in Retained Earnings was $1,170,000.

e. On July 1, 20,000 shares of common stock were issued for cash at $16 per share.

f. On September 1, the company discovered an understatement error of $90,000 in computing depreciation in 2014. The net of tax effect of $63,000 was properly debited directly to Retained Earnings.

g. A cash dividend of $250,000 was declared and properly allocated to preferred and common stock on October 1. No dividends were paid to preferred stockholders in 2019.

h. On December 31, a 10% common stock dividend was declared out of retained earnings on common stock when the market price per share was $16.

i. Net income for the year was $585,000.

j. On December 31, 2020, the directors authorized disclosure of a $200,000 restriction of retained earnings for plant expansion.

Instructions

a. Reproduce the Retained Earnings account in T-account form for 2020.

b. Prepare a retained earnings statement for 2020.

c. Prepare the stockholders equity section of the balance sheet at December 31, 2020.

d. Compute the allocation of the cash dividend to preferred and common stock. (Show your work!)

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