E4-12 (LO 6) Retained Earnings Statement

Net Income

Dividends Declared

2017

$ 40,000

$ -

2018

125,000

50,000

2019

160,000

50,000

The following information relates to 2020.

Income before income tax

Prior period adjustment:

understatement of 2018 depreciation expense (before taxes)

Cumulative decrease in income from change in inventory methods,

(before taxes)

Dividends declared (of this amount, $25,000 will be paid on Jan. 15, 2021)

Effective tax rate

Instructions:

(a)

Prepare a 2020 retained earnings statement for Eddie Zambrano Corporation.

Calculation of net income for 2020:

Calculation of beginning retained earnings:

Eddie Zambrano Corporation began operations on January 1, 2017. During its first 3 years of

operations, Zambrano reported net income and declared dividends as follows.