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

Retained earnings, December 31, 2011 ......... 1,259,000

Dividends declared and paid during 2012 ........ 100,000

Dividends declared during 2012 but not paid ........ 75,000

Dividends declared during 2011 and paid in 2012 ...... 90,000

2012 income from continuing operations (before taxes) . 850,000

Extraordinary losses in 2012 (before tax effect) ..... 135,000

The company’s tax rate is s35 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, 2012?

(b) Compute income tax expense reported in MTM’s 2012 income statements.

(c) Prepare a reconciliation of retained earnings for the year ended December 31, 2012.

(d) Assume that the income tax liability accounts had a balance of $70,000 on January 1, 2012, and that tax payments of $200,000 were made during 2012. What should be the balance in this account on December 31, 2012?