Question

Skysong Corporation has retained earnings of $691,300 at January 1, 2020. Net income during 2020 was $1,552,100, and cash dividends declared and paid during 2020 totaled $82,000. Prepare a retained earnings statement for the year ended December 31, 2020. Assume an error was discovered: land costing $88,390 (net of tax) was charged to maintenance and repairs expense in 2019. (List items that increase retained earnings first.)

Answer 1

Answer:

                               Skysong Corporation

                       Statement of Retained Earnings

Retained earnings balance January 1, 2020               $691,300

Add:

Adjustments to 2019 Income Statement                       $88,390

Net profits 2020                                                          $1,552,100

Less:

Dividends declared and distributed                            ($82,000)

Retained earnings balance December 31, 2020      $2,249,790

Since the land purchase was recorded as maintenance expense by error, the 2019 income statement must be adjusted by adding that amount.