McEntire Corporation began operations on January 1, 2009. During its first 3 years of operations, McEntire reported net income and declared dividends as follows.

The following information relates to 2012.Income before income tax $220,000Prior period adjustment: understatement of 2010 depreciation expense (before taxes) $ 25,000Cumulative decrease in income from change in inventory methods (before taxes) $ 45,000Dividends declared (of this amount, $25,000 will be paid on January 15, 2013) $100,000Effective tax rate 40%Instructions(a) Prepare a 2012 retained earnings statement for McEntire Corporation.(b) Assume McEntire restricted retained earnings in the amount of $70,000 on December 31, 2012. After this action, what would McEntire report as total retained earnings in its December 31, 2012, balancesheet?

Transcribed Image Text:

Dividends declared $ -0- 50,000 50,000 Net income $ 40,000 125,000 160,000 2009 2010 2011