E4-12 (Retained Earnings Statement) Eddie Zambrano Corporation began operations on January 1, 2011. During its first 3 years of operations, Zambrano reported net income and declared dividends as follows.

Net Income Dividends Declared

2011 $ 40,000 $0

2012 $125,000 $50,000

2013 $160,000 $0,000

The following information relates to 2014.

Income before income tax $240,000

Prior period adjustment: understatement of 2012 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, 2015) $100,000

Effective tax rate 40%

Instructions

(a)Prepare a 2014 retained earnings statement for Eddie Zambrano Corporation. (b) Assume Eddie Zambrano Corp. restricted retained earnings in the amount of $70,000 on December 31, 2014. After this action, what would Zambrano report as total retained earnings in its December?

31, 2014, balance sheet?