Accounting

Jason Woo Corporation began operations on January 1, 2017. During its first 3 years of operations, Woo reported net income and declared dividends as follows:

                                                                                      Net income                 Dividends declared

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2017                     $160,000                            $ –0–

2018                         500,000                         200,000

2019                          640,000                       200,000

The following information relates to 2020:

Income before income tax $960,000
Prior period adjustment: understatement of 2018 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, 2021) $400,000
Effective tax rate 20%
  • Prepare a 2020 retained earnings statement for Jason Woo Corporation.
  • Assume Jason Woo Corp. restricted retained earnings in the amount of $280,000 on December 31, 2020. After this action, what would Woo report as total retained earnings in its December 31, 2020, balance sheet?

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