Question

Sunland Corporation has retained earnings of $708,900 on January 1, 2020. Net income during 2020 was $1,663,000, and cash dividends declared and paid during 2020 totaled $77,800. Prepare a retained earnings statement for the year ended December 31, 2020. Assume an error was discovered: land costing $89,470 (net of tax) was charged to maintenance and repairs expense in 2019. (List items that increase retained earnings first.)

Answer 1

Answer:

Beginning RE                    708,900

prior period adjustment      89,470  

adjusted beginning RE     798,370‬

net income                       1,663,000

cash dividends                    (77,800)      

ending RE                         2,383,570‬

Explanation:

The amend of the mistake is done to adjust the beginning retained earnings as it didn't occur in the current accounting cycle.

We have to added as it was posted as an expense something it wasnt Thus, our expense were overstated making a lower net income

then, we proceed normally by adding the net income and decreasing the cash dividends paid to arrive to ending RE