(Retained Earnings Statement) McEntire Corporation began operations on January 1, 2009. During its first 3 years of operations, McEntire reported net income and declared dividends as follows.
|
Net income |
Dividends declared |
|
|
2009 |
$40,000 |
$ –0– |
|
2010 |
125,000 |
50,000 |
|
2011 |
160,000 |
50,000 |
The following information relates to 2012.
|
Income before income tax |
$220,000 |
|
Prior period adjustment: understatement of 2010 depreciation expense (before taxes) |
$ 25,000 |
|
Cumulative decrease in income from change in inventory methods (before taxes) |
$ 45,000 |
|
Dividends declared (of this amount, $25,000 will be paid on January 15, 2013) |
$100,000 |
|
Effective tax rate |
40% |
Instructions
(a) Prepare a 2012 retained earnings statement for McEntire Corporation.
(b) Assume McEntire restricted retained earnings in the amount of $70,000 on December 31, 2012. After this action, what would McEntire report as total retained earnings in its December 31, 2012, balance sheet?