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The following trial balance of Scott Corp.at December 31, 2007 has been properly adjusted except for the income tax expense adjustment.
Other financial data for the year ended December 31, 2007:
-Included in accounts receivable is $1,200,000 due from a customer and payable in quarterly installments of $150,000.The last payment is due December 29, 2009.
-The balance in the Deferred Income Tax Liability account pertains to a temporary difference that arose in a prior year, of which $20,000 is classified as a current liability.
-During the year, estimated tax payments of $525,000 were charged to income tax expense.The current and future tax rate on all types of income is 30%.

In Scott's December 31, 2007 balance sheet,
-The final retained earnings balance is
A)$4,451,000.
B)$4,536,000.
C)$4,976,000.
D)$4,905,000.

Question

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The following trial balance of Scott Corp.at December 31, 2007 has been properly adjusted except for the income tax expense adjustment. 
  Other financial data for the year ended December 31, 2007:
-Included in accounts receivable is $1,200,000 due from a customer and payable in quarterly installments of $150,000.The last payment is due December 29, 2009.
-The balance in the Deferred Income Tax Liability account pertains to a temporary difference that arose in a prior year, of which $20,000 is classified as a current liability.
-During the year, estimated tax payments of $525,000 were charged to income tax expense.The current and future tax rate on all types of income is 30%.

In Scott's December 31, 2007 balance sheet,
-The final retained earnings balance is
A)$4,451,000. 
B)$4,536,000. 
C)$4,976,000. 
D)$4,905,000.

Quizplus · Accepted Answer

To find the final retained earnings balance, we need to calculate the net income and adjust for taxes. The estimated tax payments were $525,000, but the actual tax expense should be calculated based on the income and tax rate. The correct retained earnings balance is $4,976,000 after accounting for the correct tax expense.

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