Cunningham Company reports a retained earnings balance of $365,200 at the beginning of 2016. For the year ended December 31, 2016, the company reports pretax income from continuing operations of $150,500. The following information is also available pertaining to 2016:
1. The company declared and paid a $0.72 cash dividend per share on the 30,000 shares of common stock that were outstanding the entire year.
2. The company incurred a pretax $21,000 loss as a result of an earthquake, which is not unusual for the area. This is included in the $150,500 income from continuing operations.
3. The company sold Division P (a component of the company) in May. From January through May, Division P had incurred a pretax loss from operations of $33,000. A pretax gain of $15,000 was recognized on the sale of Division P.
Assuming that all the “pretax” items are subject to a 30% income tax rate:
1. Complete the lower portion of Cunningham’s 2016 income statement beginning with “Pretax Income from Continuing Operations.” Include any related note to the financial statements.
2. Prepare an accompanying retained earnings statement.