Eddie Zambrano Corporation began operations on January 1, 2017. During its first 3 years of operations, Zambrano reported net income and declared dividends as follows. 2017 $ Net Income 40,000 $ Dividends Declared 2018 125,000 50,000 2019 160,000 50,000 The following information relates to 2020. Income before income tax Prior period adjustment: understatement of 2018 depreciation expense (before taxes) Cumulative decrease in income from change in inventory methods, (before taxes) Dividends declared (of this amount, $25,000 will be paid on Jan. 15, 2021) Effective tax rate Instructions: (a) Prepare a 2020 retained earnings statement for Eddie Zambrano Corporation. 2 Calculation of net income for 2020: Income before tax 24,000 5 Adjustment for change in accounting estimates Profits before taxation $ (60,000) 140,000 Tax expense (56,000) 7 Net income EA 84,000 8 9 Calculation of beginning retained earnings: 0 1 2 3 4 5 36 37 DO $ 240,000 $ 25,000 $ 35,000 $ 100,000 40%