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Exercise 4-15 The Bramble Corporation, a private company, began operations on January 1, 2017. During its...

Exercise 4-15 The Bramble Corporation, a private company, began operations on January 1, 2017. During its first three years of operations, Bramble reported net income and declared dividends as follows: Net income Dividends declared 2017 $54,000 $0 2018 134,000 50,000 2019 164,000 50,000 The following information is for 2020: Income before income tax $360,000 Correction of prior period error: understatement of 2018 depreciation expense (before tax) 39,000 Cumulative increase in prior years’ income from change in inventory method (before tax) 49,000 Dividends declared (of this amount, $25,000 will be paid on January 15, 2021) 100,000 Effective tax rate 40% Prepare a 2020 statement of retained earnings for Bramble Corporation. The company follows ASPE. (List items that increase retained earnings first.)

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Answer #1

Retained Earnings Statement

Balance,Jan 1 as reported (54,000+134,000+164,000-50,000-50,000)=

252000

Correction for depreciation error (39000*(1-.40)

23400

cumulative decrease in income from change in inventory methods

(49,000*(1-.40)

29400

Balance <january 1 adjusted

$200,000

Add:Net income (360,000*(1-.4)

$216,000

$416,000

less:dividend declared

$100,000

Balance ,December 31

$416,000
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