Question

The Bridgeport Corporation, a private company, began operations on January 1, 2017. During its first three years of operations, Bridgeport reported net income and declared dividends as follows: Dividends declared 2017 2018 2019 Net income $50,000 139,000 159,000 50,000 50,000 The following information is for 2020: Income before income tax Correction of prior period error: understatement of 2018 depreciation expense (before tax) Cumulative increase in prior years' income from change in inventory method (before tax) Dividends declared (of this amount, $25,000 will be paid on January 15, 2021) Effective tax rate $310,000 35,000 45,000 100,000 40% Prepare a 2020 statement of retained earnings for Bridgeport Corporation. The company follows ASPE. (List items that increase retained earnings first.) Bridgeport Corporation Statement of Retained Earnings

Answer 1

Answer
Retained Earnings Statement
Balance,Jan 1 as reported (50,000+139,000+159,000-50,000-50,000)=	$     248,000
Correction for depreciation error (35000*(1-.40)	-$       21,000
cumulative decrease in income from change in inventory methods
(45,000*(1-.40)	-$       27,000
Balance <january 1 adjusted	$     200,000
Add:Net income (310,000*(1-.4)	$     186,000
	$     386,000
less:dividend declared	$     100,000
Balance ,December 31	$     286,000