Question

Moorman Corporation reports the following information: Correction of understatement of depreciation expense in prior years, net of tax $1,290,000; Dividends declared $960,000; Net income $3,000,000; Retained earnings, 1/1/20, as reported $6,000,000. How much retained earnings should Moorman report at 12/31/

Answer 1

Answer:

Retained Earning at 12/31 will be $6,750,000.

Explanation:

Retained earnings, 1/1/20                               $6,000,000

Understatement of depreciation expense    $1,290,000

Dividends declared                                         $960,000

Net income                                                       $3,000,000

Retained Earning at 12/31 = Retained earnings, 1/1/20 - Understatement of depreciation expense - Dividends declared + Net Income for the year

Retained Earning at 12/31 = $6,000,000 - $1,290,000 - $960,000 + $3,000,000

Retained Earning at 12/31 = $6,750,000