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question the auditor for the year ended 12 31 16 has been given the following accoun 4290481

Question

The auditor for the year ended 12/31/16, has been given the following account balances related to stockholders equity:

Preferred Stock $100 par $60,000

Comon Stock $10 par $95,000

Capital Surplus $(21,400)

Retained Earnings $180,000

After looking into the capital surplus account, he found the following entries:

Premium on common stock $29,100

Capital from donated land $19,000

Premium on preferred stock $9,000

Appropriation for self-insurance $28,000

Cash dividends declared $(27,000)

Property dividend declared $(8,000)

Loss from fire $(16,000)

Stock dividend (50%) $(27,000)

Prior period adjustment (net of taxes) $(19,000)

Treasury stock (500 shares common at cost) $(9,500)

The examination of preferred and common stock accounts reveals that the amounts shown correctly reflect the total par value of shares issued. The retained earnings account contains the accumulated earnings of the company with the exception of any items inappropriately put into the capital surplus account.

REQUIRED:

1. Prepare the journal entries necessary to get the amounts where they belong (hint: journal entries will reduce capital surplus account to zero).

2. Prepare a corrected stockholders equity section of the balance sheet.

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