At the beginning of 2016, Cameron Company’s retained earnings was $212,000. For 2016, Cameron has calculated its pretax income from continuing operations to be $120,000. During 2016, the following events also occurred:
1. During July, Cameron sold Division M (a component of the company). It has determined that the pretax income from the operations of Division M during 2016 totals $39,000 and that a pretax loss of $40,500 was incurred on the sale of Division M.
2. Cameron had 21,000 shares of common stock outstanding during all of 2016. It declared and paid a $1 per share cash dividend on this stock.
Required:
Assuming that all the pretax items are subject to a 30% income tax rate:
1. Complete the lower portion of Cameron’s 2016 income statement, beginning with “Pretax Income from Continuing Operations.”
2. Prepare an accompanying retained earnings statement.