Exercise 4-12

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 $41,200 $ 0 2012 130,300 51,700 2013 165,400 53,700

The following information relates to 2014.

Income before income tax $229,500 Prior period adjustment: understatement of 2012 depreciation expense (before taxes) $29,300 Cumulative decrease in income from change in inventory methods (before taxes) $42,100 Dividends declared (of this amount, $29,300 will be paid on January 15, 2015) $105,400 Effective tax rate 40 %

Prepare a 2014 retained earnings statement for Eddie Zambrano Corporation. (List items that increase retained earnings first.)

EDDIE ZAMBRANO CORPORATION Retained Earnings Statement For the Year Ended December 31, 2014

$

:

:

$

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Assume Eddie Zambrano Corp. restricted retained earnings in the amount of $67,290 on December 31, 2014. After this action, what would Zambrano report as total retained earnings in its December 31, 2014, balance sheet?

Total retained earnings $