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"2016: Ending inventory was overstated by $60,000 while depreciation expense was overstated by $25,400. 2017: Ending inventory was understated by $6,500 while depreciation expense was understated by $4,800. By how much should retained earnings be adjusted on January 1, 2018?"

User Jarrell
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1 Answer

2 votes

Answer:

$25,800 increase

Step-by-step explanation:

The computation of the adjusted retained earning balance is shown below:

Ending inventory was overstated - no change

Add: Depreciation expense was overstated $24,100

Add: Ending inventory was understated $6,500

Less: Depreciation expense was understated ($4,800)

Adjusted retained earning balance $25,800

User Dominguez
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