(Retained Earnings Statement) Eddie Zambrano Corporation began operations on January 1, 2001. During its first 3 years of operations, Zambrano reported net income and declared dividends as follows.
Net income Dividends declared
2001 $ 40,000 $ -0-
2002 125,000 50,000
2003 160,000 50,000
The following information relates to 2004.
Income before income tax $240,000
Prior period adjustment: understatement of 2002 depreciation expense (before taxes) $ 25,000
Cumulative decrease in income from change in inventory methods (before taxes) $ 35,000
Dividends declared (of this amount, $25,000 will be paid on Jan. 15, 2005) $100,000Effective tax rate 40%
Instructions:
(a) Prepare a 2004 retained earnings statement for Eddie Zambrano Corporation.
(b) Assume Eddie Zambrano Corp. restricted retained earnings in the amount of $70,000 on December 31, 2004. After this action, what would Zambrano report as total retained earnings in its December 31, 2004, balance sheet?