Lakeland Corporation reported the following pretax (and taxable) information for 2016:
Income from continuing operations
$550,000
Loss on disposal of Segment B
45,000
Prior period adjustment-Depreciation was understated in 2015
15,000
Gain from operations of discontinued Segment B
35,000
Income tax rate
35%
?
Required:
a.Prepare the lower portion of Lakeland's 2016 income statement, beginning with pretax income for continuing operations. (Omit the heading.)b.Prepare Lakeland's 2016 statement of retained earnings, assuming that retained earnings at January 1, 2016, was $750,000 and the company paid $45,000 of dividends in 2016. (Omit the heading.)
What will be an ideal response?
| a. | Pretax income from continuing operations | ? | $550,000 | |
| ? | Income tax expense | ? | (192,500) | |
| ? | Income from continuing operations | ? | $357,500 | |
| ? | Results of discontinued operations: | ? | ? | |
| ? | ? | Gain from operations of discontinued Segment B | ? | ? |
| ? | ? | (net of $12,250 income taxes) | $22,750 | ? |
| ? | ? | Loss on disposal of discontinued Segment B | ? | ? |
| ? | ? | (net of $15,750 income tax credit) | (29,250) | (6,500) |
| ? | Net income | ? | $351,000 | |
| ? | ? | ? | ? | |
| b. | Retained earnings, January 1, 2016 | ? | $750,000 | |
| ? | Less: Prior period adjustment, understatement | ? | ? | |
| ? | of 2015 depreciation expense | ? | ? | |
| ? | (net of $5,250 income tax credit) | ? | (9,750) | |
| ? | Adjusted retained earnings, January 1, 2016 | ? | $740,250 | |
| ? | Add: Net income | ? | 351,000 | |
| ? | ? | ? | $1,091,250 | |
| ? | Less: Dividends | ? | (45,000) | |
| ? | Retained earnings, December 31, 2016 | ? | $1,046,250 | |
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