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3 The Holiday Corporation, a private company, began operations on January 1, 2011. During its first three years of operations, Holiday reported net income and
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The Holiday Corporation, a private company, began operations on January 1, 2011. During its first three years of operations, Holiday reported net income and declared dividends as follows:
Net income | Dividends declared | |
2011 | $54,000 | $0 |
2012 | 136,000 | 25,000 |
2013 | 160,000 | 44,000 |
The following information is for 2014:
Income before income tax | $360,000 |
Prior period adjustment: understatement of 2011 depreciation expense (before tax) | 56,000 |
Cumulative increase in prior years income from change in inventory method (before tax) | 36,000 |
Dividends declared (of this amount, $22,000 will be paid on January 15, 2015) | 88,000 |
Effective tax rate | 35% |
Prepare a 2014 statement of retained earnings for Holiday Corporation. The company follows ASPE.
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