At the beginning of 2007, the retained earnings of the Cameron Company was $212,000. For 2007, the

Question:

At the beginning of 2007, the retained earnings of the Cameron Company was $212,000. For 2007, the company has calculated its pretax income from continuing operations to be $120,000. During 2007, the following events also occurred:
1. During July the company sold Division M (a component of the company). It has determined that the pretax income from the operations of Division M during 2007 totals $39,000 and that a pretax loss of $40,500 was incurred on the sale of Division M.
2. The company had 21,000 shares of outstanding during all of 2007. It declared and paid a $1 per share cash on this stock.
3. The company experienced an extraordinary event. It recognized a material pretax gain of $26,000 on the event.
4. The company found and corrected a pretax $18,000 understatement of the 2006 because of a mathematical error.

Required
Assuming that all the “pretax” items are subject to a 30% income tax rate:
1. Complete the lower portion of Cameron Company’s 2007 income statement, beginning with “Pretax Income from Continuing Operations.”
2. Prepare an accompanying retained earnings statement.

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