E4-12 (Retained Earnings Statement) Eddie Zambrano Corporation began operations on January 1, 2011. During its first 3 years of operations, Zambrano reported net income and declared dividends as follows.
|
Year |
Net income |
Dividends declared |
|
2013 |
$40,000 |
$0 |
|
2014 |
125,000 |
50,000 |
|
2015 |
160,000 |
50,000 |
The following information relates to 2014:
|
Income before income taxes |
$240,000 |
|
Prior period adjustment: Understatement of 2012 depreciation expense. |
|
|
(Before taxes) |
$25,000 |
|
Cumulative decrease in income from change in inventory methods (before taxes) |
$35,000 |
|
Dividends declared |
$100,000 |
|
Of the dividends declared to date, the amount that will be paid on Jan 15, 2015 is: |
$25,000 |
|
Effective tax rate |
40% |
Instructions:
(a) Prepare a 2014 retained earnings statement for Eddie Zambrano Corporation.
(b) AssumeEddie Zambrano Corp. restricted retained earnings in the amount of $70,000 on December 31, 2014. After this action, what would Zambrano report as total retained earnings in its December 31, 2014, balance sheet?
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