Question

In: Accounting

Exercise 4-12 Pharoah Corporation began operations on January 1, 2014. During its first 3 years of...

Exercise 4-12 Pharoah Corporation began operations on January 1, 2014. During its first 3 years of operations, Pharoah reported net income and declared dividends as follows: Net income Dividends declared 2014 $43,400 $ –0– 2015 131,800 57,500 2016 164,000 52,400 The following information relates to 2017. Income before income tax $242,600 Prior period adjustment: understatement of 2015 depreciation expense (before taxes) $34,700 Cumulative decrease in income from change in inventory methods (before taxes) $36,100 Dividends declared (of this amount, $34,700 will be paid on January 15, 2018) $109,900 Effective tax rate 40 % Prepare a 2017 retained earnings statement for Pharoah Corporation. (List items that increase adjusted retained earnings first.) PHAROAH CORPORATION Retained Earnings Statement $ : : $ Assume Pharoah Corporation restricted retained earnings in the amount of $75,260 on December 31, 2017. After this action, what would Pharoah report as total retained earnings in its December 31, 2017, balance sheet? Total retained earnings $

Solutions

Expert Solution

Reatined Earnings Statement
Balance, January 1          229,300
Correction for depreciation error(net of Tax)
(34700-34700*40% )		          (20,820)
Cumulative decrease in income from change in inventory methods
(36100-36100*40%)		          (21,660)
Balance, January 1 Adjusted          186,820
Add: Net income- 2017 (242600*.6)          145,560
Subtotal          332,380
Less: Dividend Declared       (109,900)
Balance, Dec 31          222,480

Workings:

Year Net Income Dividend Net Earnings
2014             43,400                   -               43,400
2015          131,800          57,500             74,300
2016          164,000          52,400           111,600
Retained Earnings , Balance Jan 1           229,300
2017
Income before income tax          242,600
understatement of 2015 depreciation expense            34,700
Cumulative decrease in income from change in inventory methods            36,100
Dividends declared          109,900
Tax Rate 40%

Part b:

The Total Retained Earnings will be same 222,480. It just labes part of the earnings as restricted and not available for distribution.

Reatined Earnings
Appropriated          75,260
Unappropriated       147,220
Total       222,480


Dear Student,

Best effort has been made to give quality and correct answer. But if you find any issues please comment your concern. I will definitely resolve your query.

Also please give your positive rating.

ekkarill92 answered 1 year ago
Next > < Previous

Related Solutions

Liang Company began operations on January 1, 2016. During its first two years, the company completed...
Liang Company began operations on January 1, 2016. During its first two years, the company completed a number of transactions involving sales on credit, accounts receivable collections, and bad debts. These transactions are summarized as follows. 2016 Sold $1,353,200 of merchandise (that had cost $984,100) on credit, terms n/30. Wrote off $18,100 of uncollectible accounts receivable. Received $669,300 cash in payment of accounts receivable. In adjusting the accounts on December 31, the company estimated that 1.20% of accounts receivable will...
Liang Company began operations on January 1, 2016. During its first two years, the company completed...
Liang Company began operations on January 1, 2016. During its first two years, the company completed a number of transactions involving sales on credit, accounts receivable collections, and bad debts. These transactions are summarized as follows. 2016 Sold $1,345,400 of merchandise (that had cost $983,900) on credit, terms n/30. Wrote off $18,100 of uncollectible accounts receivable. Received $665,600 cash in payment of accounts receivable. In adjusting the accounts on December 31, the company estimated that 2.10% of accounts receivable will...
Liang Company began operations on January 1, 2016. During its first two years, the company completed...
Liang Company began operations on January 1, 2016. During its first two years, the company completed a number of transactions involving sales on credit, accounts receivable collections, and bad debts. These transactions are summarized as follows. 2016 Sold $1,354,000 of merchandise (that had cost $980,800) on credit, terms n/30. Wrote off $20,600 of uncollectible accounts receivable. Received $674,700 cash in payment of accounts receivable. In adjusting the accounts on December 31, the company estimated that 2.20% of accounts receivable will...
Liang Company began operations on January 1, 2015. During its first two years, the company completed...
Liang Company began operations on January 1, 2015. During its first two years, the company completed a number of transactions involving sales on credit, accounts receivable collections, and bad debts. These transactions are summarized as follows. 2015 Sold $1,350,300 of merchandise (that had cost $975,800) on credit, terms n/30. Wrote off $19,300 of uncollectible accounts receivable. Received $671,600 cash in payment of accounts receivable. In adjusting the accounts on December 31, the company estimated that 1.10% of accounts receivable will...
Liang Company began operations on January 1, 2016. During its first two years, the company completed...
Liang Company began operations on January 1, 2016. During its first two years, the company completed a number of transactions involving sales on credit, accounts receivable collections, and bad debts. These transactions are summarized as follows. 2016 Sold $1,351,100 of merchandise (that had cost $981,600) on credit, terms n/30. Wrote off $18,700 of uncollectible accounts receivable. Received $667,400 cash in payment of accounts receivable. In adjusting the accounts on December 31, the company estimated that 2.40% of accounts receivable will...
Liang Company began operations on January 1, 2017. During its first two years, the company completed...
Liang Company began operations on January 1, 2017. During its first two years, the company completed a number of transactions involving sales on credit, accounts receivable collections, and bad debts. These transactions are summarized as follows. 2017 Sold $1,353,300 of merchandise (that had cost $977,400) on credit, terms n/30. Wrote off $18,200 of uncollectible accounts receivable. Received $666,400 cash in payment of accounts receivable. In adjusting the accounts on December 31, the company estimated that 1.70% of accounts receivable will...
Liang Company began operations on January 1, 2017. During its first two years, the company completed...
Liang Company began operations on January 1, 2017. During its first two years, the company completed a number of transactions involving sales on credit, accounts receivable collections, and bad debts. These transactions are summarized as follows. 2017 Sold $1,348,400 of merchandise (that had cost $984,500) on credit, terms n/30. Wrote off $18,400 of uncollectible accounts receivable. Received $670,200 cash in payment of accounts receivable. In adjusting the accounts on December 31, the company estimated that 1.30% of accounts receivable will...
Liang Company began operations in Year 1. During its first two years, the company completed a...
Liang Company began operations in Year 1. During its first two years, the company completed a number of transactions involving sales on credit, accounts receivable collections, and bad debts. These transactions are summarized as follows. Year 1 a. Sold $1,354,000 of merchandise (that had cost $981,600) on credit terms n/30. b. Wrote off $21,700 of uncollectible accounts receivable. c. Received $665,300 cash in payment of accounts receivable. d. In adjusting the accounts on December 31, the company estimated that 2.5%...
Liang Company began operations in Year 1. During its first two years, the company completed a...
Liang Company began operations in Year 1. During its first two years, the company completed a number of transactions involving sales on credit, accounts receivable collections, and bad debts. These transactions are summarized as follows. Year 1 Sold $1,345,434 of merchandise (that had cost $975,000) on credit, terms n/30. Wrote off $18,300 of uncollectible accounts receivable. Received $669,200 cash in payment of accounts receivable. In adjusting the accounts on December 31, the company estimated that 1.5% of accounts receivable would...
Liang Company began operations in Year 1. During its first two years, the company completed a...
Liang Company began operations in Year 1. During its first two years, the company completed a number of transactions involving sales on credit, accounts receivable collections, and bad debts. These transactions are summarized as follows. Year 1 Sold $1,352,200 of merchandise (that had cost $980,100) on credit, terms n/30. Wrote off $21,900 of uncollectible accounts receivable. Received $674,600 cash in payment of accounts receivable. In adjusting the accounts on December 31, the company estimated that 1.60% of accounts receivable would...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT