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On December 31, 2020, an analysis of the accounts for a company reveals the following: $100,000...

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

ekkarill92 answered 1 year ago
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