(Retained Earnings Statement) Eddie Zambrano Corporation began operations on January 1, 2001. During its first 3 years of operations, Zambrano reported net income and declared dividends as follows.

                         Net income      Dividends declared

2001                 $ 40,000                    $ –0–

2002                 125,000                    50,000

2003                 160,000                    50,000

The following information relates to 2004.

Income before income tax                                                                                                                    $240,000

Prior period adjustment: understatement of 2002 depreciation expense (before taxes)         $  25,000

Cumulative decrease in income from change in inventory methods (before taxes)                  $  35,000

Dividends declared (of this amount, $25,000 will be paid on Jan. 15, 2005)                                $100,000

Effective tax rate                                                                                                                                          40%

Instructions

(a) Prepare a 2004 retained earnings statement for Eddie Zambrano Corporation.

(b) Assume Eddie Zambrano Corp. restricted retained earnings in the amount of $70,000 on December 31, 2004. After this action, what would Zambrano report as total retained earnings in its December 31, 2004, balance sheet?