McEntire Corporation began operations on January 1, 2019. During its first 3 years of operations, McEntire reported net income and declared dividends as follows.

The following information relates to 2022.

Income before income tax ....................................................................................................... $220,000
Prior period adjustment: understatement of 2020 depreciation expense (before
taxes) ............................................................................................................................................. $ 25,000
Cumulative decrease in income from change in inventory methods (before taxes) ........... $ 45,000
Dividends declared (of this amount, $25,000 will be paid on Jan. 15, 2023) ........................ $100,000
Effective tax rate .................................................................................................................................... 20%

Instructions

a. Prepare a 2022 retained earnings statement for McEntire Corporation.

b. Assume McEntire Corporation restricted retained earnings in the amount of $70,000 on December 31, 2022. After this action, what would McEntire report as total retained earnings in its December 31, 2022, statement of financial position?

Transcribed Image Text:

Net income Dividends declared 2019 $ 40,00 $ -0- 2020 125,000 50,000 2021 160,000 50,000