Disclosure of Intraperiod Tax Allocation Lester Corporation reports $119,000 of both pretax accounti

Disclosure of Intraperiod Tax Allocation

Lester Corporation reports $119,000 of both pretax accounting “income” and taxable income in 2016. In addition to income from continuing operations (of which revenues are $500,000), included in this “income” is a $17,000 loss from operations of discontinued Division W, a $15,000 gain on the disposal of Division W, and a $14,000 correction of an error due to the understatement of bad debt expense in 2015. Lester is subject to a 20% tax rate on the first $50,000 of income and a rate of 25% on income in excess of $50,000.

Required:

1. Show how this information is disclosed on Lester's 2016 income statement. LESTER CORPORATION Income Statement For Year Ended December 31, 2016 Revenues $ Pretax income from continuing operations $ $ Results from discontinued operations: $ $

2. Prepare Lester's 2016 statement of retained earnings. (Assume a beginning retained earnings balance of $191,000 and cash dividends during 2013 amounting to $65,000.) LESTER CORPORATION Statement of Retained Earnings For Year Ended December 31, 2016 Retained earnings, January 1, 2016 $ Adjusted retained earnings, January 1, 2016 $ $ Retained earnings, December 31, 2016 $