Chapter 7
Corporations: The Financial Statements
372
d) If the company had followed IFRS, would the statement of retained earnings be the same
as part b)? Explain.
AP-15B (
2
3
6
)
The following information was taken from the accounting records of Cutler Inc. at December
31, 2016. Cutler Inc. is a private corporation and follows ASPE.
Line Item
Amount
Prior-year error—debit to retained earnings
$15,000
Income tax expense on operating income from discontinued operations
19,600
Total dividends
67,000
Common shares, 75,000 shares issued
201,000
Sales revenue
605,000
Interest expense
17,000
Operating income, discontinued operations
56,000
Loss due to lawsuit
16,000
Sales discounts
30,000
Income tax savings on sale of discontinued operations (sold at a loss)
8,750
General expenses
23,000
Income tax expense on continuing operations
73,150
Preferred shares, $7.00, 1,000 shares issued
60,000
Retained earnings, January 1, 2016 (prior to adjustment)
135,000
Loss on sale of assets from discontinued operations
25,000
Cost of goods sold
310,000
Assume a tax rate of 35%. During the year, no shares were issued or redeemed. Preferred
dividends were paid in full.
