Wright Company reports the following information for the year ended December 31, 2016:
Pretax income from continuing operations .......... $160,000a
Pretax income from operations of discontinued Division M .... 27,000
Pretax loss on disposal of Division M ............ (45,000)
Pretax correction of error in understating depreciation in 2015 ... (8,000)
Retained earnings, January 1, 2016 ............. 410,000
Cash dividends during 2016 ............... 48,000
Income tax payable .................... 41,000
aOf this amount, revenues are $ 400,000 and expenses are $ 240,000.
bOf this amount, $ 6,750 relates to the pretax income from the operations of discontinued Division M; pretax loss on the disposal of Division M resulted in an income tax savings of $ 11,250; and pretax correction of the depreciation error resulted in an income tax savings of $ 2,000.
Required:
1. Prepare the year end journal entry necessary to record the 2016 intraperiod income tax allocation in regard to the preceding information.
2. Prepare Wright’s 2016 income statement and statement of retained earnings.