McEntire Corporation began operations on January 1, 2009. During its first 3 years of operations, McEntire reported net income and declared dividends as follows.
The following information relates to 2012.
Income before income tax $220,000
Prior period adjustment: understatement of 2010 depreciation expense (before taxes) $ 25,000
Cumulative decrease in income from change in inventory methods (before taxes) $ 45,000
Dividends declared (of this amount, $25,000 will be paid on January 15, 2013) $100,000
Effective tax rate 40%
(a) Prepare a 2012 retained earnings statement for McEntire Corporation.
(b) Assume McEntire restricted retained earnings in the amount of $70,000 on December 31, 2012. After this action, what would McEntire report as total retained earnings in its December 31, 2012, balancesheet?
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