Question

At December 31, 2022, a company’s beginning retained earnings balance is $413,000 and ending retained earnings balance is $497,000. The company had a correction of error for a $5,000 pre-tax overstatement of net income in 2021. The 2022 income statement reports net income of $90,000. The company has a 30% tax rate.

Answer 1

The subject is Business at a College level. The question is about changes in a company's retained earnings and the effects of a correction of error.

Step-by-step explanation:

The subject of this question is Business at a College level. The question is asking about the changes in a company's retained earnings and how a correction of error affects them. To calculate the corrected net income for 2021, we need to subtract the pre-tax overstatement of $5,000. This gives us a corrected net income of $85,000. To calculate the corrected beginning retained earnings balance, we subtract the corrected net income for 2021 and add the 2022 net income. Therefore, the corrected beginning retained earnings balance is $413,000 - $5,000 + $90,000 = $498,000.