Wildhorse Corporation began operations on January 1, 2017. During its first 3 years of operations, Wildhorse reported net income and declared dividends as follows:
Net income |
Dividends declared |
|||||
2017 | $43,300 | $ –0– | ||||
2018 | 126,900 | 58,000 | ||||
2019 | 161,500 | 55,800 |
The following information relates to 2020.
Income before income tax | $230,700 | ||
Prior period adjustment: understatement of 2018 depreciation expense (before taxes) | $26,700 | ||
Cumulative decrease in income from change in inventory methods (before taxes) | $45,000 | ||
Dividends declared (of this amount, $26,700 will be paid on Jan. 15, 2021) | $113,800 | ||
Effective tax rate | 20 | % |
Prepare a 2020 retained earnings statement for Wildhorse Corporation. (List items that increase adjusted retained earnings first.)
Assume Wildhorse Corporation restricted retained earnings in the amount of $63,810 on December 31, 2020. After this action, what would Wildhorse report as total retained earnings in its December 31, 2020, balance sheet?
Total retained earnings |
$ |
WILDHORSE CORPORATION | ||
Retained earnings statement | ||
For the Year ended December 31, 2020 | ||
Retained earnings as on Jan 1($43,300+126,900+161,500-58,000-55,800) | $ 2,17,900 | |
Less:Correction for understatment of depreciation expenses net of tax($26,700*0.80) | $ 21,360 | |
Less:Cumulative decrease in income,net of tax($45,000*0.80) | $ 36,000 | |
Adjusted balance as on Jan 1,2020 | $ 1,60,540 | |
Add:Net Income for 2020 after tax($230,700*0.80) | $ 1,84,560 | |
Balance before dividend | $ 3,45,100 | |
Less:Dividend declared for 2020 | $ 87,100 | |
Retained earnings as on Dec 31,2020 | $ 2,58,000 | |
Total Retained will be reported as $258,000 even if there is restricted retained earnings, only the appropiated and restricted amount will be shown seaparetely | ||
Appropiated Retained earnings($258,000-$63,810) | $ 1,94,190 | |
Restricted Retained earnings | $ 63,810 | |
Retained earnings as on Dec 31,2020 | $ 2,58,000 | |
Wildhorse Corporation began operations on January 1, 2017. During its first 3 years of operations, Wildhorse...
Wildhorse Corporation began operations on January 1, 2017. During its first 3 years of operations, Wildhorse reported net income and declared dividends as follows: Net income Dividends declared 2017 $43,300 $ –0– 2018 126,900 58,000 2019 161,500 55,800 The following information relates to 2020. Income before income tax $230,700 Prior period adjustment: understatement of 2018 depreciation expense (before taxes) $26,700 Cumulative decrease in income from change in inventory methods (before taxes) $45,000 Dividends declared (of this amount, $26,700 will be...
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