Problem 16
Below is the Retained Earnings account for the year 2017 for Headland Corp.
Retained earnings, January 1, 2017
$258,070
Add:
Gain on sale of investments (net of tax)
$41,670
Net income
84,970
Refund on litigation with government, related to the year
2014 (net of tax)
22,070
Recognition of income earned in 2016, but omitted from
income
25,870
174,580
432,650
statement in that year (net of tax)
Deduct:
Loss on discontinued operations (net of tax)
35,470
Write-off goodwill (net of tax)
60,470
Cumulative effect on income of prior years in changing
from
LIFO to FIFO inventory valuation in 2017 (net of tax)
23,670
Cash dividends declared
32,170
152,080
Retained earnings, December 31, 2017
$280,570
(a) Prepare a corrected retained earnings statement. Headland Corp. normally sells investments of the
type mentioned above. FIFO inventory was used in 2017 to compute net income. (List items that increase
adjusted retained earnings first.)
HEADLAND CORP.
Retained Earnings Statement