Question

Windsor Corporation has retained earnings of $702,500 at January 1, 2017. Net income during 2017 was $1,426,500, and cash dividends declared and paid during 2017 totaled $83,200. Prepare a retained earnings statement for the year ended December 31, 2017. Assume an error was discovered: land costing $89,590 (net of tax) was charged to maintenance and repairs expense in 2014. (List items that increase retained earnings first.)

Answer 1

Answer:

The end of the year balance in retained earnings after correction of prior period error is $2,135,390  

Explanation:

It is important to note that the error discovered has reduced retained earnings previously and by the time it is corrected retained earnings would increase by that amount of $89,590

Beginning retained earnings                     $702,500

net income for 2017                                   $1,426,500

dividends declared and paid in 2017         ($83,200)

correction of prior period error                   $89,590

Ending retained earnings                           $2,135,390