Exercise 4-15

The Grouper Corporation, a private company, began operations on January 1, 2014. During its first three years of operations, Grouper reported net income and declared dividends as follows:

		Net income			Dividends declared
2014		$57,000			$0
2015		137,000			50,000
2016		158,000			50,000

The following information is for 2017:

Income before income tax		$370,000
Prior period adjustment: understatement of 2015 depreciation expense (before tax)		59,000
Cumulative increase in prior years income from change in inventory method (before tax)		39,000
Dividends declared (of this amount, $25,000 will be paid on January 15, 2018)		100,000
Effective tax rate		40%

1. Prepare a 2017 statement of retained earnings for Grouper Corporation. The company follows ASPE. (List items that increase retained earnings first.)

2. Assume Grouper Corporation restricted retained earnings in the amount of $70,000 on December 31, 2017. After this action, what would Grouper report as total retained earnings in its December 31, 2017, balance sheet?