Brief Exercise 410 Buffalo Corporation has retained earnings

Brief Exercise 4-10 Buffalo Corporation has retained earnings of $689,900 at January 1, 2017. Net income during 2017 was $1,529,000, and cash dividends declared and paid during 2017 totaled $80,700. Prepare a retained earnings statement for the year ended December 31, 2017. Assume an error was discovered: land costing $87,420 (net of tax) was charged to maintenance and repairs expense in 2014. (List items that increase retained earnings first.) BUFFALO CORPORATION Correction for Overstatement of Expenses in Prior Period Cash Dividends Net Income/ (Loss) Retained Earnings, January 1, as Adjusted Retained Earnings, January 1, as Reported Retained Earnings, December 31 Revenues Total Expenses Total Revenues

Solution

BUFFALO CORPORATION
Retained Earnings Statement
For the Year Ended December 31, 2017

Retained earnings, January 1, as reported                                            $689900
Correction for overstatement of expenses in
prior period (net of tax)                                                                              87420
Retained earnings, January 1, as adjusted                                              777320
Add: Net income                                                                                      1529000

                    2306320

Less: Cash dividends                                                                                 80700

Retained earnings, December 31                                                            $2225620