The following information has been obtained from the internal financial records of MTM Company:

Retained earnings, December 31, 20 14..........$1,259,000

Dividends declared and paid during 2015 .........100,000

Dividends declared during 20 15 but not paid ........ 75,000

Dividends declared during 20 14 and paid in 2015 ...... 90,000

20 15 income from continuing operations (before taxes) ....850,000

Extraordinary losses in 20 15 (before tax effect) .......135,000

The company’s tax rate is 35 percent. Assume that financial accounting income equals income for tax purposes.

REQUIRED:

a. What is the company’s net income for the year ended December 31, 2015?

b. Compute income tax expense reported in MTM’s 2015 income statement.

c. Prepare a reconciliation of retained earnings for the year ended December 31, 2015.

d. Assume that the income tax liability account had a balance of $70,000 on January 1, 2015, and that tax payments of $200,000 were made during 2015. What should be the balance in this account on December 31, 2015?