On January 1, 2016, Kittson Company had a retained earningsbalance of $218,600. It is subject to a 30% corporate income taxrate. During 2016, Kittson earned net income of $67,000, and thefollowing events occurred:
| Oct. 1 | Cash dividends of $3 per share on 4,000 shares of common stockwere declared. |
| Oct. 10 | October 1 declaration of dividends was paid. |
| Nov. 1 | A small stock dividend was declared. The dividends consisted of600 shares of $10 par common stock. On the date of declaration, themarket price of the company’s common stock was $36 per share. |
| Nov. 10 | November 1 declaration of dividends was paid. |
| Dec. 1 | The company recalled and retired 500 shares of $100 parpreferred stock. The call price was $125 per share; the stock hadoriginally been issued for $110 per share. |
| Dec. 31 | The company discovered that it had erroneously recordeddepreciation expense of $45,000 in 2015 for both financialreporting and income tax reporting. The correct depreciation for2015 should have been $20,000. This is considered a materialerror. |
Required:
| 1. | Prepare journal entries to record Kittson Company’stransactions during 2016. |
| 2. | Prepare Kittson’s statement of retained earnings for the yearended December 31, 2016. |
