Disclosure of Intraperiod Tax Allocation Lester Corporation reports $119,000 of both pretax accou...
Disclosure of Intraperiod Tax Allocation
Lester Corporation reports $119,000 of both pretax accounting "income" and taxable income in 2016. In addition to income from continuing operations (of which revenues are $500,000), included in this "income" is a $17,000 loss from operations of discontinued Division W, a $15,000 gain on the disposal of Division W, and a $14,000 correction of an error due to the understatement of bad debt expense in 2015. Lester is subject to a 20% tax rate on the first $50,000 of income and a rate of 25% on income in excess of $50,000.
Required:
1. Show how this information is disclosed on Lester's 2016 income statement.
| LESTER CORPORATION | ||
| Income Statement | ||
| For Year Ended December 31, 2016 | ||
| Revenues | $ | |
| Pretax income from continuing operations | $ | |
| $ | ||
| Results from discontinued operations: | ||
| $ | ||
| $ | ||
2. Prepare Lester's 2016 statement of retained earnings. (Assume a beginning retained earnings balance of $191,000 and cash dividends during 2013 amounting to $65,000.)
| LESTER CORPORATION | |
| Statement of Retained Earnings | |
| For Year Ended December 31, 2016 | |
| Retained earnings, January 1, 2016 | $ |
| Adjusted retained earnings, January 1, 2016 | $ |
| $ | |
| Retained earnings, December 31, 2016 | $ |
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