Portman Corporation has retained earnings of $675,000 at January 1, 2014. Net income during 2014 was $1,400,000, and cash divide
nds declared and paid during 2014 totaled $75,000. Prepare a retained earnings statement for the year ended December 31, 2014. Assume an error was discovered: land costing $80,000 (net of tax) was charged to maintenance and repairs expense in 2011. (List items that increase retained earnings first.)
PORTMAN CORPORATION
Retained Earnings Statement
For the Year Ended December 31, 2014
Correction for Overstatement of Expenses in Prior PeriodCash DividendsExpensesNet Income / (Loss)Retained Earnings, January 1, as AdjustedRetained Earnings, January 1, as ReportedRetained Earnings, December 31RevenuesTotal ExpensesTotal Revenues
$
Correction for Overstatement of Expenses in Prior PeriodCash DividendsExpensesNet Income / (Loss)Retained Earnings, January 1, as AdjustedRetained Earnings, January 1, as ReportedRetained Earnings, December 31RevenuesTotal ExpensesTotal Revenues
Correction for Overstatement of Expenses in Prior PeriodCash DividendsExpensesNet Income / (Loss)Retained Earnings, January 1, as AdjustedRetained Earnings, January 1, as ReportedRetained Earnings, December 31RevenuesTotal ExpensesTotal Revenues
AddLess: Correction for Overstatement of Expenses in Prior PeriodCash DividendsExpensesNet Income / (Loss)Retained Earnings, January 1, as AdjustedRetained Earnings, January 1, as ReportedRetained Earnings, December 31RevenuesTotal ExpensesTotal Revenues
AddLess: Correction for Overstatement of Expenses in Prior PeriodCash DividendsExpensesNet Income / (Loss)Retained Earnings, January 1, as AdjustedRetained Earnings, January 1, as ReportedRetained Earnings, December 31RevenuesTotal ExpensesTotal Revenues
Correction for Overstatement of Expenses in Prior PeriodCash DividendsExpensesNet Income / (Loss)Retained Earnings, January 1, as AdjustedRetained Earnings, January 1, as ReportedRetained Earnings, December 31RevenuesTotal ExpensesTotal Revenues
PORTMAN CORPORATION
Retained Earnings Statement
For the Year Ended December 31, 2014
Correction for Overstatement of Expenses in Prior PeriodCash DividendsExpensesNet Income / (Loss)Retained Earnings, January 1, as AdjustedRetained Earnings, January 1, as ReportedRetained Earnings, December 31RevenuesTotal ExpensesTotal Revenues
$
Correction for Overstatement of Expenses in Prior PeriodCash DividendsExpensesNet Income / (Loss)Retained Earnings, January 1, as AdjustedRetained Earnings, January 1, as ReportedRetained Earnings, December 31RevenuesTotal ExpensesTotal Revenues
Correction for Overstatement of Expenses in Prior PeriodCash DividendsExpensesNet Income / (Loss)Retained Earnings, January 1, as AdjustedRetained Earnings, January 1, as ReportedRetained Earnings, December 31RevenuesTotal ExpensesTotal Revenues
AddLess: Correction for Overstatement of Expenses in Prior PeriodCash DividendsExpensesNet Income / (Loss)Retained Earnings, January 1, as AdjustedRetained Earnings, January 1, as ReportedRetained Earnings, December 31RevenuesTotal ExpensesTotal Revenues
AddLess: Correction for Overstatement of Expenses in Prior PeriodCash DividendsExpensesNet Income / (Loss)Retained Earnings, January 1, as AdjustedRetained Earnings, January 1, as ReportedRetained Earnings, December 31RevenuesTotal ExpensesTotal Revenues
Correction for Overstatement of Expenses in Prior PeriodCash DividendsExpensesNet Income / (Loss)Retained Earnings, January 1, as AdjustedRetained Earnings, January 1, as ReportedRetained Earnings, December 31RevenuesTotal ExpensesTotal Revenues
1 answer:
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Answer:
Difference between A and B =$42398.5
Process B is better as its PW value is smaller than Process A.
Explanation:
In order to use present worth, both Alternatives must have same time period. Since Process B has 4 years means 16 quarters so we make process A to have 16 quarters two with 2% interest rate per quarter.
Note:
We are going to use Compound Interest tables to simplify our work. Formulas can also be used.
For Process A:
Present value of process A=
Present value of process A=
Present value of process A=-$466,932.5
For Process B:
Present value of process B=
Present value of process B=
Present value of process B=-$424,534
Difference between A and B =(-$424,534)-(-$466,932.5)
Difference between A and B =$42398.5
Process B is better as its PW value is smaller than Process A.