Question

Please, show the problem solving process.
Concord Corp. began operations in 2014. During the years 2014-2016, it reported net income and declared dividends as follows. Dividends declared Net income $22.000 $-0- 2014 2015 2016 125,000 201,000 60.000 During 2017, Concord Corp.: • discovered that it had failed, in 2015, to record $48.000 in depreciation on equipment in one of its warehouses. • changed, on January 1,2017, from the average cost to the FIFO method of accounting for its inventory. If Concord Corp. had applied the FIFO method to it inventory in prior years, cumulative net income (before tax) would have been $16,000 lower than originally reported. • reported income before income tax expense of $540,000. • declared and paid dividends to common shareholders of $72,000. Concord's effective income tax rate for all years was 40%.

Answer 1

All figures shown are in $ only

Concord Corporation
	Retained earnings statement	2017
	Retained earnings , January 1st , as reported		148800
	Correction for depreciation		-48000
	Cumulative decraese in Income from changes in Inventory methods		-16000
	Retained earnings,January Ist , as adjusted		84800
Add	Net Income / ( Loss ) - before taxation	540000
Less	Income tax @ 40%	216000
	Net Income / ( Loss ) - after taxation	324000
Less	Dividend Declared	72000
	Retained earnings , December 31		252000

Note 1 - Working for Retained Earnings as on January 1st , 2017
2014 - Net Income - before taxation	22000
Less : Income tax @ 40%	8800
2014 - Net Income - After taxation	13200
2014 - Dividend declared	0
Retained earnings as on December 31 , 2014	13200
2015 - Net Income - before taxation	125000
Less : Income tax @ 40%	50000
2015 - Net Income - after taxation	75000
2015 - Dividend declared	0
Retained earnings as on December 31 , 2015	88200
2016 - Net Income - before taxation	201000
Less : Income tax @ 40%	80400
2016 - Net Income - after taxation	120600
2016 - Dividend declared	60000
Retained earnings as on December 31 , 2016	148800

How would Concord Corporation present retained earnings on its December,31 2017 balance sheet ?
Total retained earnings		252000
Restricted Retained Earnings	67000
Unrestricted Retained Earnings	185000

Restricted Retained Earnings are not available for distribution of dividends . It is restricted for a specific purpose.