Before the recalculation, there was only 185,000 in current and retained earnings available to distribute.

Yes, you have to do the recalculation, anytime the question indicates that the amount given for earnings does not include non-operational income.  The gain on the property is non-operational income.  Becker's question stated that the 185,000 was operational income only.

If 185,000 was indeed the TOTAL earnings from every source (as Wiley phrased the question), the 200,000 dividend would be split: 185,000 taxable distribution of income and 15,000 non-taxable return of invested capital.