Question - The Holiday Corporation, a private company, began operations on January 1, 2011. During its first three years of operations, Holiday reported net income and declared dividends as follows:
|
Net Income
|
Dividends declared
|
|
2011
|
$58,000
|
$0
|
|
2012
|
135,000
|
29,000
|
|
2013
|
165,000
|
44,000
|
The following information is for 2014:
|
Income before income tax
|
$320,000
|
|
Prior period adjustment: understatement of 2011 depreciation expense (before tax)
|
60,000
|
|
Cumulative increase in prior years' income from change in inventory method (before tax)
|
40,000
|
|
Dividends declared (of this amount, $22,000 will be paid on January 15, 2015)
|
88,000
|
|
Effective tax rate
|
25%
|
Prepare a 2014 statement of retained earnings for Holiday Corporation. The company follows ASPE.