At the beginning of 2013, Norris Company had a deferred tax liability of $7,300, because of the use of MACRS depreciation for income tax purposes and units-of-production depreciation for financial reporting. The income tax rate is 30% for 2012 and 2013, but in 2012 Congress enacted a 40% tax rate for 2014 and future years. Norris's accounting records show the following pretax items of financial income for 2013: income from continuing operations, $171,000 (revenues of $316,000 and expenses of $145,000); gain on disposal of Division F, $22,600; extraordinary loss, $21,000; loss from operations of discontinued Division F, $10,600; and prior period adjustment, $13,800, due to an error that understated revenue in 2012. All of these items are taxable; however, financial depreciation for 2013 on assets related to continuing operations exceeds tax depreciation by $4,200. Norris had a retained earnings balance of $153,000 on January 1, 2013, and declared and paid cash dividends of $40,000 during 2013.
Prepare Norris's 2013 income statement.
Prepare Norri's 2013 statement of retained earnings.
Show the related income tax disclosures on Norris's December 31, 2013, balance sheet.