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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

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 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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