Question

Leonard Corporation reports the following information: Correction of overstatement of depreciation expense in prior years, net of tax $ 215,000 Dividends declared 160,000 Net income 500,000 Retained earnings, 1/1/12, as reported 2,000,000 Leonard should report retained earnings, 1/1/12, as adjusted at a. $1,785,000. b. $2,000,000. c. $2,215,000. d. $2,555,000.
And how?

Answer 1

Answer:

Option ‘C’ $ 2,215,000

Explanation:

Given data:

Retained Earnings on 1/1/12 = $ 2,000,000

Depreciation of previous years stated OVERSTATED.  which result in Retained Earnings stated UNDER-STATED.

Therefore, the total depreciation amount of Overstated when corrected increase the amount of  Retained earnings.

The Retained Earning balance on 1/1/12 after corrected is calculated as

= $ 2,000,000 + $ 215,000

= $ 2,215,000

Correct Answer = Option ‘C’ $ 2,215,000