Eddie Zambrano Corporation began operations on January 1, 2011. During its first 3 years of operations,

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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?

    • 9 years ago
    Eddie Zambrano Corporation began operations on January 1, 2011. During its first 3 years of operations,
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