E3.12 (LO 3) Excel (Retained Earnings Statement) Eddie Zambrano Corporation began operations on January 1, 2022. During its first 3 years of operations, Zambrano reported net income and declared dividends as follows. Net Income Dividends Declared 2022 $ 40,000 $ -0- 2023 125,000 50,000 2024 160,000 50,000 The following information relates to 2025. Income before income tax $240,000 Prior period adjustment: understatement of 2023 depreciation expense (before taxes) 25,000 Dividends declared (of this amount, $25,000 will be paid on Jan. 15, 2026) 100,000 Effective tax rate 20% Instructions a. Prepare a 2025 retained earnings statement for Eddie Zambrano Corporation. b. Assume Eddie Zambrano Corporation restricted retained earnings in the amount of $70,000 on December 31, 2025. After this action, what would Zambrano report as total retained earnings in its December 31, 2025, balance sheet?
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On May 1, Soriano Co. reported the following account balances along with their estimated fair values: Carrying Value Fair Value Receivables $ 90,000 $ 90,000 Inventory 75,000 75,000 Copyrights 125,000 480,000 Patented technology 825,000 700,000 Total assets $ 1,115,000 $ 1,345,000 Current liabilities $ 160,000 $ 160,000 Long-term liabilities 645,000 635,000 Common stock 100,000 Retained earnings 210,000 Total liabilities and equities $1,115,000 On that day, Zambrano paid cash to acquire all of the assets and liabilities of Soriano, which will cease to exist as a separate entity. To facilitate the merger, Zambrano also paid $100,000 to an investment banking firm. The following information was also available:
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