E 4 11 Retained Earnings Statement Net Income Dividends

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E 4 11 Retained Earnings Statement Net Income Dividends Powered By Docstoc
					Jesica Islas
Intermediate Accounting 1
February 05, 2007
Professor A. Wu
Chapter 4

                                                           Exercises

E 4-11 (Retained Earnings Statement)

                                           Net Income                 Dividends
             2004                          40,000                     0
             2005                          125,000                    50,000
             2006                          160,000                    50,000

(a)                                                  Eddie Zambrano Corporation
                                                      Retained Earnings Statement
                                              For the Year Ended December 31, 2007

Balance, January 1, as reported..................................................................................          $225,000*
Correction for depreciation error (net of $10,000 tax) ..............................................                       (15,000)
Cumulative decrease in income from change in
            inventory methods (net of $14,000 tax) .......................................................                  (21,000)
Balance, January 1, as adjusted..................................................................................           189,000
Add: Net income ........................................................................................................    144,000**
                                                                                                                            333,000
Less: Dividends declared ...........................................................................................        100,000
Balance, December 31 ...............................................................................................       $233,000


 *($40,000 + $125,000 + $160,000) – ($50,000 + $50,000)
**[$240,000 – (40% X $240,000)]

(b)      Total retained earnings would still be reported as $233,000. A restriction does not affect
         total retained earnings; it merely labels part of the retained earnings as being unavailable
         for dividend distribution. Retained earnings would be reported as follows:
Jesica Islas
Intermediate Accounting 1
February 05, 2007
Professor A. Wu
Chapter 4

            Retained earnings:
                 Appropriated      $ 70,000
                 Un-appropriated    163,000
                   Total           $233,000

				
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