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MC Qu. 64 LO 20-06 C Co. reported a retained earnings balance of... C Co. report

ID: 2500879 • Letter: M

Question

MC Qu. 64 LO 20-06 C Co. reported a retained earnings balance of...

C Co. reported a retained earnings balance of $250,000 at December 31, 2012. In September 2013, C determined that insurance premiums of $78,000 for the three-year period beginning January 1, 2012, had been paid and fully expensed in 2012. C has a 40% income tax rate. What amount should C report as adjusted beginning retained earnings in its 2013 statement of retained earnings?

$296,800

$302,000

$281,200

$276,000

C Co. reported a retained earnings balance of $250,000 at December 31, 2012. In September 2013, C determined that insurance premiums of $78,000 for the three-year period beginning January 1, 2012, had been paid and fully expensed in 2012. C has a 40% income tax rate. What amount should C report as adjusted beginning retained earnings in its 2013 statement of retained earnings?

Explanation / Answer

Retained earnings After tax= 250,000

Retained earnings before tax= 250,000/(1-0.4)=416,667

Adjusted retained earnings before tax= 416,667-78,000=338,667

Adjusted retained earnings after tax= 338667-(338667*0.4)=2,03,200

adjusted beginning retained earnings= 203,200$