Question

Presented below is information related to Cheyenne Corp. for the year 2017.

Net sales $1,307,700 Write-off of inventory due to obsolescence $84,810
Cost of goods sold 783,400 Depreciation expense omitted by accident in 2016 44,900
Selling expenses 70,400 Casualty loss 46,800
Administrative expenses 57,500 Cash dividends declared 41,910
Dividend revenue 24,700 Retained earnings at December 31, 2016 1,018,730
Interest revenue 7,450 Effective tax rate of 34% on all items
Prepare a separate retained earnings statement for 2017. (List items that increase adjusted retained earnings first.)
CHEYENNE CORP.
Retained Earnings Statement
For the Year Ended December 31, 2017
Retained Earnings, January 1, as reported
Correction for Overstatement of Net Income in Prior Period
Retained Earnings, January 1, as adjusted
Add:Net Income/(Loss)
Less . Dividends Declared
Retained Earnings, December 31

Answer 1

Retained earning at end $1,357,521

Step-by-step explanation:

To calculate retain earning at end, we need to calculate first the net profit or loss.

Sales

$1,307,700

Less: cost of goods sold

($783,400 - $84,810)

($698,590)

Less: Selling & administrative expenses ($70,400 + $57,500)

($127,900)

Gross profit.

$481,210

Add: Dividend revenue

$24,700

Profit before tax

$505,910

Tax ($505,910 × 34%)

$172,009

Less: Deduction of casualty loss

($46,800)

Tax liability

$125,209

Profit after tax

$505,910 - $125,209

= $380,701

Nash Corp. Statement of retained earning.

Retained earning(opening)

$1,018,730

Less : Dividend declared

($41,910)

$976,820

Add : Profit

$380,701

Retained earning at end $1,357,521