Carlos Zambrano Corporation began operations on January 1, 2005. During its first 3 years of operations, Zambrano reported net income and declared dividends as follows.
The following information relates to 2008.
Income before income tax $240,000
Prior period adjustment: understatement of 2006 depreciation expense (before taxes) $ 25,000
Cumulative decrease in income from change in inventory methods (before taxes) $ 35,000
Dividends declared (of this amount, $25,000 will be paid on Jan. 15, 2009) $100,000
Effective tax rate 40%
(a) Prepare a 2008 retained earnings statement for Carlos Zambrano Corporation.
(b) Assume Carlos Zambrano Corp. restricted retained earnings in the amount of $70,000 on December 31, 2008. After this action, what would Zambrano report as total retained earnings in its December 31, 2008, balance sheet?