Year 2007 2008 2009 Net income $40,000 125,000 160,000 Dividends declared so 50,000 50,000 The following information relates to 2010: Income before income taxes Prior period adjustment: Understatement of 2008 depreciation expense. (Before taxes) Cumulative decrease in income from change in inventory methods (before taxes) Dividends declared (of this amount, $25,000 will be paid on Jan. 15, 2011) Effective tax rate Instructions: (a) Prepare a 2010 retained earnings statement for McEntire Corporation. $220,000 $25,000 $45,000 $100,000 20%

Year 2007 2008 2009 Net income $40,000 125,000 160,000 Dividends declared so 50,000 50,000 The following information relates to 2010: Income before income taxes Prior period adjustment: Understatement of 2008 depreciation expense. (Before taxes) Cumulative decrease in income from change in inventory methods (before taxes) Dividends declared (of this amount, $25,000 will be paid on Jan. 15, 2011) Effective tax rate Instructions: (a) Prepare a 2010 retained earnings statement for McEntire Corporation. $220,000 $25,000 $45,000 $100,000 20%

Financial Reporting, Financial Statement Analysis and Valuation

8th Edition

ISBN:9781285190907

Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Chapter4: Profitability Analysis

Section: Chapter Questions

Problem 23PC

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During 2019, DGP Company decided to change from the FIFO inventory valuation to the weighted average method. The income tax rate is 30%. FIFO Weighted Average January 1, inventory P7,100,000 P7,700,000 December 31, inventory 7,900,000 8,200,000 What amount should be reported in the cumulative effect of the change in accounting policy for 2019? A P600,000 decrease in retained earnings B P420,000 decrease in retained earnings P420,000 increase in retained earnings (D) P600,000 increase in retained earnings
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This year Last year 1050 Assets Cash 1530 Marketable securities Accounts receivable Inventories Total current assets 1810 1220 2050 1770 2900 2790 8290 6830 Gross fixed assets 29480 28090 Less: Accumulated depreciation 14680 13140 Net fixed assets 14800 14950 Total assets Liabilities and Stockholders' Equity 23090 21780 Accounts payable Notes payable Accruals 1560 1540 2760 2160 190 350 Total current liabilities 4510 4050 Long-term debt Common stock Retained earnings Total stockholders' equity 5220 4970 9950 9950 3410 2810 13360 12760 Total liabilities and stockholders' equity 23090 21780
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Presented below is X Corporation's selected data for 2020: Retained earnings January 1 ,2020 Pretax Income Stock dividends declared During the year, the company changed its inventory method from FIFO to LIFO which had resulted in a pretax increase in income by: Cash dividends declared During 2020, the company discovered that the 2019 depreciation expense were overstated by a net of tax amount of Tax rate $6,000,000 2,000,000 330,000 40,000 225.000 70.000 30% Based on the data above, the changes in the accounting principles (from FIFO to LIFO) had O Decreased retained earnings by $40.000 Increased retained earnings by $40000 O Increased retained earnings by $28,000 O None of the above
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