Question

Wildhorse Corporation has retained earnings of $677,000 at January 1, 2020. Net income during 2020 was $1,510,000, and cash dividends declared and paid during 2020 totaled $82,000. In addition, an error was discovered: land costing $87,000 (net of tax) was charged to maintenance and repairs expense in 2019. Determine the ending retained earnings balance for the year ended December 31, 2020.

Answer 1

$2,192,000

Step-by-step explanation:

Adjusted January 1, 2020 retained earning = January 1, 2020 retained earning + Error (Land cost) = $677,000 + $87,000 = $764,000

Retained earning for 2020 = Net income during 2020 - Dividends declared and paid during 2020 = $1,510,000 - $82,000 = $1,428,000

December 31, 2020 retained earnings = Adjusted January 1, 2020 retained earning + Retained earning for 2020 = $764,000 + $1,428,000 = $2,192,000.

Therefore, the ending retained earnings balance for the year ended December 31, 2020 is $2,192,000.