At the beginning of 2010, the retained earnings of the Cameron Company were $212,000. For 2010, the

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At the beginning of 2010, the retained earnings of the Cameron Company were $212,000. For 2010, the company has calculated its pretax income from continuing operations to be $120,000. During 2010, 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 2010 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 common stock outstanding during all of 2010. It declared and paid a $1 per share cash dividend 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 2009 ending inventory 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 2010 income statement, beginning with “Pretax Income from Continuing Operations.”
2. Prepare an accompanying retained earnings statement.

Ending Inventory
The ending inventory is the amount of inventory that a business is required to present on its balance sheet. It can be calculated using the ending inventory formula                Ending Inventory Formula =...
Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on...
Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...
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Intermediate Accounting

ISBN: 978-0324659139

11th edition

Authors: Loren A. Nikolai, John D. Bazley, Jefferson P. Jones

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