Question

Below is the Retained Earnings account for the year 2020 for Swifty Corp. Retained earnings, January 1, 2020 $261,300 Add:_______.

Gain on sale of investments (net of tax) $44,900
Net income 88,200
Refund on litigation with government, related to the year 2017 (net of tax) 25,300
Recognition of income earned in 2019, but omitted from income statement in that year (net of tax) 29,100 187,500 448,800
Deduct:
Loss on discontinued operations (net of tax) 38,700
Write-off of goodwill (net of tax) 63,700
Cumulative effect on income of prior years in changing from LIFO to FIFO inventory valuation in 2020 (net of tax) 26,900
Cash dividends declared 35,700 165,000
Retained earnings, December 31, 2020 $283,800
Prepare a corrected retained earnings statement. Waterway Corp. normally sells investments of the type mentioned above. FIFO inventory was used in 2020 to compute net income. (List items that increase adjusted retained earnings first.)

Answer 1

Swifty Corp.

Retained Earnings Statement

Retained earnings, January 1, 2020 $261,300

Correction of error from prior period $29,100

Adjustment for change in accounting principle - $26,900

Retained earnings, January, Adjusted $263,500

Add Net Income $56,000

Less Cash dividend -$35,700

Retained earnings, December 31, 2020 $283,800

Workings

Net Income $88,200

+ Gain on sale of investments (net of tax) $44,900

Refund on litigation with government $22,530

$158,400

- Loss on discontinued operation $38,700

Write-off of goodwill $63,700

Net Income $56,000