2012 Acadian Corp R.E. Retained Earnings jan 1 2012 $257600 Add: Gain on sale in

Question

2012 Acadian Corp R.E.

Retained Earnings jan 1 2012 $257600
Add:
Gain on sale investment (net of tax) 41200
Net Income 84500
Refund litigation yr 2009 (net of tax) 21600
Recognition income earned 2011 omitted from IS (net of tax) 25400
Total 430300

Deduct:
Loss on discontinued oper. (net of tax) 35000
Write-off of goodwill (net of tax) 60000
Cumulative effect on income of prior yrs changing
LIFO TO FIFO 2012 (net of tax) 23200
Cash divedends declared 32000

Retained earnings dec 31 2012 280100

1)prepare corrected R.E. statement. Acadian normally sells investments of type mentioned abov
above. FIFO was used to compute 2012 net income.
2) state where items that do not appear in the corrected R.E. statement should be shown.

Explanation / Answer

a) Retained Earnings, Jan 1, as reported $257,600 Correction for understatement of net income in prior period $25,400 (Correction error) Correction for overstatement of net income in prior period ($23,200) (Change in accounting principle) Retained Earnings, Jan 1, as adjusted $259,800 Add: Net Income (Changes in Income Statement) $52,300 Less: Cash dividends $32,000 Retained Earnings, December 31 $280,100 b) are shown in paranthesis. This is the impact on income statement Income from Continuing Operations XXX (add) Gain on Sale of Investments ($41,200) (less) Loss on Discontinued Operations ($35,000) (add) Refund on litigation with the government ($21,600) (less) Write off of Goodwill ($60,000) = Net effect on income of -$32,200 Net Income as of 12/31/2012 is $52,300 and should be reported as such on corrected Retained Earnings Statement

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