2024 – E4 12 Retained Earnings Statement Eddie Zambrano Corporation began operations on January 1 2011 During its

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?