ABC is preparing its 2019 financial statements. Before taking into account the following information, net income from continuing operations before tax for 2019 was determined to be $500,000. ABC has a corporate tax rate of 30%.

a. ABC purchased equipment on January 1, 2018 for $20,000. On the date of purchase, ABC inadvertently expensed the entire $20,000 and failed to record depreciation in 2018 and 2019. The company would normally have used the straightline depreciation method with a $2,000 salvage value and 18 year useful life.

b. On March 31, 2019, ABC discontinued and disposed of a component of their business. The component was sold for $300,000. At the time of disposal, the historical cost of the component was $1,000,000 and accumulated depreciation was $625,000. The component had a pretax net loss from operations of $60,000 from January 1, 2019 until the date it was sold.

c. Beginning Retained Earnings (as of 1/1/09) was $3,000,000 and dividends of $200,000 were declared and paid during 2019.

3 part Questions

1. After making the appropriate adjustments, what is the correct amount of net income from continuing operations before tax that should be reported in the 2019 financial statements?

2. Prepare a partial income statement for the year 2019, beginning with net income from continuing operations before tax (use your corrected value from the first question).

3. What is the correct balance for Retained Earnings as of 1/1/2020?