The general ledger of Robichaud Corporation, a publicly traded company, contained the following shareholders' equity accounts in 2018:

_______________________________________________________January 1___December 31

Preferred shares (10,000 and 20,000 shares issued, respectively).........$ 500,000.........$1,000,000

Common shares (320,000 and 370,000 shares issued, respectively).....2,700,000...........3,700,000

Stock dividends distributable..............................................................................0..............407,000

Retained earnings..................................................................................2,980,000...........3,345,000

A review of the accounting records for the year ended December 31, 2018, reveals the following information:

1. On January 1, 10,000 additional $5 noncumulative preferred shares were issued for $50 each. An unlimited number are authorized.

2. On October 1, 50,000 common shares were sold for cash at $20 per share. An unlimited number are authorized.

3. The annual preferred shareholders' cash dividend was declared and paid during the year.

4. On December 31, a 5% stock dividend was declared on common shares when the share price was $22. The stock dividend is distributable on January 20.

5. Net income for the year was $872,000.

6. On December 31, the board of directors authorized a $500,000 restriction on retained earnings for a plant expansion.

Instructions

(a) Using T accounts, determine the transactions that explain the movement in the Preferred Shares, Common Shares, Dividends Declared, Stock Dividends Distributable, and Retained Earnings general ledger accounts for the year.

(b) Prepare the shareholders' equity section of the statement of financial position at December 31, including any required note disclosure.