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irina [24]
3 years ago
10

Gardiner, Inc. reported a retained earnings balance of $190,000 at December 31, 2024. In June 2025, Gardiner discovered that mer

chandise costing $20,000 had not been included as ending inventory in its 2024 financial statements. Also, a $50,000 accrued revenue was omitted on 12/31/24. Gardiner has a 20% tax rate. Assuming the correcting journal entry net of tax was recorded, what amount should Gardiner report as adjusted beginning retained earnings in its statement of retained earnings for year ended December 31, 2025?
Business
1 answer:
Drupady [299]3 years ago
6 0

Answer: $246,000

Explanation:

Merchandise costing $20,000 had been omitted from the Ending Inventory.

Ending inventory is deducted from Cost of Goods sold which means that the Cost of Goods sold was overstated by $20,000.

Cost of Goods sold are subtracted from sales to find Gross Income so if it was overstated then Income was understated by $20,000.

Accrued Revenue is to be added to Income so if it was omitted then income was understated by $50,000.

Income in total was therefore understated by = 20,000 + 50,000

= $70,000

The correcting entry is net of tax so;

= 70,000 * ( 1 - 20%)

= $56,000

Retained earnings will therefore be;

= 190,000 + 56,000

= $246,000

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