McEntire Corporation began operations on January 1, 2007. During its first 3 yea
ID: 2363563 • Letter: M
Question
McEntire Corporation began operations on January 1, 2007. During its first 3 years of operations, McEntire reported net income and declared dividends as follows. Net income Dividends declared 2007 $40,000 $ -0- 2008 125,000 50,000 2009 160,000 50,000 The following information relates to 2010. Income before income tax $220,000 Prior period adjustment: understatement of 2008 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 Jan. 15, 2011) $100,000 Effective tax rate 20% (a) Prepare a 2010 retained earnings statement for McEntire Corporation. (Enter all amounts as positive amounts and subtract where necessary. List amounts from largest to smallest, eg 10,5,1.) (b) Assume McEntire Corp. restricted retained earnings in the amount of $70,000 on December 31, 2010. After this action, what would McEntire report as total retained earnings in its December 31, 2010, statement of financial position? Total retained earnings $Explanation / Answer
Without knowing the net income or dividends for 2010, it's impossible to prepare a 2010 retained earnings statement.