Real Statistical Research, INC., (RSRI) ended 2010 with retained earnings of $72

Question

Real Statistical Research, INC., (RSRI) ended 2010 with retained earnings of $72,000. During 2011 RSRI earned net income of $85,000 and declared dividends of $25,000.
Also during 2011, RSRI got a $22,000 tax refund from the Internal Revenue Service. A tax audit revealed that RSRI paid too much income tax back in 2009. Prepare Real Statistical Research's statement of retained earnings for the next year ended December 31, 2011, to report the prior-period adjustments.

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Explanation / Answer

Statement of Retained Earnings for           December 31, 2011. Retained Earnings Opening Balance 72000 Add: Current year Net Income 85000 Total 157000 Less: Dividends 25000 Retained Earnings 132000 Add: Tax Refund for 2009 22000 Closing Balance of Retained Earnings 154000 If we received current year tax refund then we can't adjust to retained earnings, only we have to show as current year other income. Thank you...... If we received current year tax refund then we can't adjust to retained earnings, only we have to show as current year other income. Thank you......    Retained Earnings Opening Balance 72000 Add: Current year Net Income 85000 Total 157000 Less: Dividends 25000 Retained Earnings 132000 Add: Tax Refund for 2009 22000 Closing Balance of Retained Earnings 154000

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