exercise 4-11

Project Description:

mcentire corporation began operations on january 1, 2009. during its first 3 years of operations, mcentire reported net income and declared dividends as follows.

net income
dividends declared
2009 $41,200 $ –0–
2010 128,200 59,600
2011 165,400 56,800

the following information relates to 2012.

income before income tax $237,500
prior period adjustment: understatement of 2010 depreciation expense (before taxes) $31,700
cumulative decrease in income from change in inventory methods (before taxes) $42,800
dividends declared (of this amount, $31,700 will be paid on january 15, 2013) $116,400
effective tax rate 40 %

(a) prepare a 2012 retained earnings statement for mcentire corporation. (list items that increase retained earnings first.)

(b) assume mcentire restricted retained earnings in the amount of $66,170 on december 31, 2012. after this action, what would mcentire report as total retained earnings in its december 31, 2012, balance sheet?
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