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    Retained Earnings Statement- Eddoe Zambrano Corporation

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    (a) Prepare a 2007 retained earnings statement for Eddie Zambrano Corporation. (Enter all amounts as positive amounts and subtract where necessary.)

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

    Cum. decr. in income from change in inventory methodsDividends declaredNet incomeBalance-January 1 as reported $
    Correction for depreciation error (net of taxes)
    Dividends declaredNet incomeCum. decr. in income from change in inventory methodsBalance-January 1 as reported

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    E4-11

    (Retained Earnings Statement)

    Eddie Zambrano Corporation began operations on January 1, 2004. During its first 3 years of operations, Zambrano reported net income and declared dividends as follows.

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

    The following information relates to 2007.

    Income before income tax $240,000
    Prior period adjustment: understatement of 2005 depreciation expense (before taxes) $ 25,000
    Cumulative decrease in income from change in inventory methods (before taxes) $ 35,000
    Dividends declared (of this amount, $25,000 will be paid on Jan. 15, 2008) $100,000
    Effective tax rate 40%

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    (a) Prepare a ...

    Solution Summary

    The solution has the calculation of the Retained Earnings Statement for Eddoe Zambrano Corporation.

    $2.19