Question

Simmons Corporation reports the following information: Correction of understatement of depreciation expense in prior years, net of tax $ 430,000 Dividends declared 320,000 Net income 1,000,000 Retained earnings, 1/1/17, as reported 2,000,000 Simmons should report retained earnings, 1/1/17, as adjusted at

Answer 1

$2,250,000

Explanation:

The computation of retained earnings is shown below:-

Retained earnings 31/1/17 = Retained earning 1/1/17 + Net income of current year - Understatement of depreciation expenses - Dividends declared

= $2,000,000 + 1,000,000 - $430,000 - $320,000

= $2,250,000

Therefore for computing the retained earnings 31/1/17 we simply applied the above formula.

As we assume that the question is asked for the 31/1/17 instead of 1/1/17 as it is already mentioned in the question