In: Accounting
On December 31, 2020, an analysis of the accounts for a company reveals the following:
$100,000 loss on disposal of discontinued operations, before tax
$6,000 gain on sale of investments, before tax
$10,000 depreciation expense understatement in 2018 due to error, before tax
$20,000 cumulative understatement of net income of prior years from changing inventory valuation method in 2020, before tax
$168,000 income from operations, before tax
$4,000 dividends declared
The applicable income tax rate is 40% for all tax-related items. Retained earnings on December 31, 2019 were reported as $600,000.
What is ending retained earnings on December 31, 2020?
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Particulars | Amount $ |
Loss on disposal of discontinued operations, before tax | (100,000.00) |
Gain on sale of investments, before tax | 6,000.00 |
Depreciation expense understatement in 2018 due to error, before tax | (10,000.00) |
Cumulative understatement of net income of prior years from changing inventory valuation method in 2020, before tax | 20,000.00 |
Income from operations, before tax | 168,000.00 |
Income before tax | 84,000.00 |
Less: tax at 40% | 33,600.00 |
Income after tax | 50,400.00 |
Statement of retained earnings | Amount $ |
Opening balance | 600,000.00 |
Add: Income after tax | 50,400.00 |
Less: Dividends declared | (4,000.00) |
Ending retained earnings on December 31, 2020 | 646,400.00 |