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 4 months ago

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