1. At Martinez Company, events and transactions during 2021 included the following three items. The tax rate for all items is 25%.

1. Depreciation Expense for 2016 was found to have been understated by $100,000. The error was found during 2021.
2. Supply chain problems in 2021resulted in Martinez Company being unable to fulfill one of its sales contracts on a timely basis. Under the terms of that contract, defaulting on the contract resulted in Martinez Company paying a fine to the customer of $100,000.
3. An inventory count at the end of 2021 showed inventory was overstated by $100,000.

What is the effect of each of these three items on the 2021 Income Statement of Martinez Company, net of tax? Explain each of your answers.

2. Xiong Service Corp. has a tax rate of 25% and income before non-operating items before tax of $1,500,000. It also has the following items (gross amounts).

Unusual loss $200,000

Gain on disposal of equipment 44,000

Change in accounting principle

increasing prior year's income 300,000

What is the total amount of income tax expense this company would report on its income statement this year?

3. In 2021, Esme Inc. reported net income of $500,000. In 2021, Esme Inc.s board of directors declared and paid dividends of $150,000 to its preferred stock holders, and dividends of $60,000 to its common stockholders. During 2021, Esther had a weighted average of 300,000 common shares outstanding.

Compute the amount of earnings per share Esme Inc. will show on its 2021 Income Statement.

4. Zhahmink Inc. Balance Sheet for 12/31/2020 showed Retained Earnings, of $ 6,000,000. This additional information has become available:

Correction of understatement of an operating expense in prior years,

net of tax $1,200,000

Dividends declared and paid in 2021 900,000

Net income for 2021 2,000,000

What is the amount of the companys retained earnings, 1/1/21, as adjusted?