Eddie Zambrano Corporation

Eddie Zambrano Corporation in $4 only

Eddie Zambrano Corporation began operations on January 1, 2011. During its first 3 years of operations, Zambrano reported net income and declared dividends as follows.

YearNet incomeDividends declared
2013$40,000$0
2014125,00050,000
2015160,00050,000

The following information relates to 2014:
Income before income taxes$240,000
Prior period adjustment: Understatement of 2012 depreciation expense.
(Before taxes)$25,000
Cumulative decrease in income from change in inventory methods (before taxes)$35,000
Dividends declared$100,000
Of the dividends declared to date, the amount that will be paid on Jan 15, 2015 is:$25,000
Effective tax rate40%

Instructions:

(a) Prepare a 2014 retained earnings statement for Eddie Zambrano Corporation.

(b) AssumeEddie Zambrano Corp. restricted retained earnings in the amount of

$70,000 on December 31, 2014. After this action, what would Zambrano report as total retained earnings in its December 31, 2014, balance sheet?

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