question abc is preparing its 2009 financial statements before taking into account t 4281146
ABC is preparing its 2009 financial statements. Before taking into account the following information, net income from continuing operations before tax for 2009 was determined to be $500,000. ABC has a corporate tax rate of 30%.
A) ABC purchased equipment on January 1, 2008 for $20,000. On the date of purchase, ABC inadvertently expensed the entire $20,000 and failed to record depreciation in 2008 and 2009. The company would normally have used the straightline depreciation method with a $2,000 salvage value and 18 year useful life.
B) On March 31, 2009, ABC discontinued and disposed of a component of their business. The component was sold for $310,000. At the time of disposal, the historical cost of the component was $1,000,000 and accumulated depreciation was $625,000. The component had a pretax net loss from operations of $60,000 from January 1, 2009 until the date it was sold.
C) Beginning Retained Earnings (as of 1/1/09) was $3,000,000 and dividends of $200,000 were declared and paid during 2009.
1) After making the appropriate adjustments, what is the correct amount of net income from continuing operations before tax that should be reported in the 2009 financial statements?
2) Prepare a partial income statement for the year 2009, beginning with net income from continuing operations before tax (use your corrected value from the first question).
3) What is the correct balance for Retained Earnings as of 1/1/2010?