Eddie Zambrano Corporation began operations on January 1, 2011. During its first 3 years
accounting teacherEddie 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?
9 years ago
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