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Exercise 4-12 Pearl Corporation began operations on January 1, 2014. During its first 3 years of operations, Pearl reported net income and declared dividends as

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Exercise 4-12 Pearl Corporation began operations on January 1, 2014. During its first 3 years of operations, Pearl reported net income and declared dividends as follows: 2014 2015 2016 Net income $45,100 132,100 161,100 Dividends declared $-0- 56,400 53,900 The following information relates to 2017: Income before income tax Prior period adjustment: understatement of 2015 depreciation expense (before taxes) Cumulative decrease in income from change in inventory methods (before taxes) Dividends declared (of this amount, $31,500 will be paid on January 15, 2018) Effective tax rate $223,800 $31,500 $38,500 $110,300 40 %

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