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How do calculate the impact on retained earnings

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Reference no: EM132629226

The following information is available for Reynolds Corporation:

Retained Earnings, December 31, 2020              $1,500,000

Profit for the year ended December 31, 2021          250,000

The company accountant, in preparing financial statements for the year ending December 31, 2021, has discovered the following information:

  • The company's previous bookkeeper, who has been fired, had recorded depreciation expense on a machine in 2019 and 2020 using the double diminishing-balance method of depreciation. The bookkeeper neglected to use the straight-line method of depreciation which is the company's policy. The cumulative effect of the error on prior years was $9,000. Depreciation was calculated by the straight-line method in 2021. Reynolds' average tax rate is 22%. During 2021, Reynolds declared and paid cash dividends of $80,000.

Problem a) Calculate the impact on retained earnings.

Problem b) Also need to do the statement of retained earnings for 2021.

Reference no: EM132629226

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