E4-12B (Retained Earnings Statement) Jason Woo Corporation began operations on January 1, 2012.

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E4-12B (Retained Earnings Statement) Jason Woo Corporation began operations on January 1, 2012. During

its first 3 years of operations, Woo reported net income and declared dividends as follows.

                                                  Net income                 Dividends declared

2012                                        $160,000                               $ –0–

2013                                          500,000                              200,000

2014                                          640,000                              200,000

The following information relates to 2014.

Income before income tax                                                                                                             $960,000

Prior period adjustment: understatement of 2013 depreciation expense (before taxes) $100,000

Cumulative decrease in income from change in inventory methods (before taxes)         $140,000

Dividends declared (of this amount, $100,000 will be paid on Jan. 15, 2015)                  $400,000

Effective tax rate 40%

Instructions

(a) Prepare a 2014 retained earnings statement for Jason Woo Corporation.

(b) Assume Jason Woo Corp. restricted retained earnings in the amount of $280,000 on December 31, 2014. After this a

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