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connect g Q Aaeonconc Online , YouTube Bank of Amencal Hone i Swegbucks y : Condet. Carth older SOC Student g.Mruese Hon Chapter 13 Homework 7 Exercise 13-11 Preparing a statement of retained earnings LO C3 The following information is available for Amos Company for the year ended December 31, 2017. o. Balance of retained earnings, December 31, 2016, prior to discovery of error, $851000 148 points b. Cash dividends declared and paid during 2017, $28,000 c. It neglected to record 2015 depreciation expense of $46,600, which is net of $6,300 in tax benefits. d. The company earned $206,000 in 2017 net income. 21 Prepare a 2017 statement of retained eanings for Amos Company (Amounte to be deducted should be indicane Statement of Retained Earnings For Year Ended December 31, 2017 $ 000 earnings, December 31, 2016 PeferencesPrior period adustment (46,600 804 400 206,000 (28.000 $82 400 eciation expense error in 2015 (net of tax) Owners capital Add Net income ess Dividends tained earmings, December 31, 2017 Type here to search

Solution

Amos Company
Statement of Retained Earnings
For The Year Ended 31 Dec 2017

Explanations:

Any error made in earlier years is needed to be correct first and it should be done under Prior period Adjustments.

In given case, Depreciation of 2015 should be adjusted first. For Neglecting it in 2015, The balance in retained earings is too high and hence, depreciation exp of 2015 should be deducted from retained earnings.

Prior period adjustments are always recorded in net of tax benefits. The Pretax Depreciation Balance was = $(46600 + 6300) = $52900. After the tax adjustments it becomes $46600 and hence this amount is deducted from retained earnings.

After calculating correct retained earnings, we can adjust current year activies like adding net come and subtracting cash dividend paid for arriving at Retained earning balance as on 31 dec 2017.

Particulars	Amount
Retained Earnings As on 31 dec 2016	$851000
Prior Period Adjustments:
Depreciation Expenses	$(46600)
Adjusted Retained Earnings, 31 Dec 2016	$804400
Add: Net Income of 2017	$206000
Less: Dividend paid in 2017	$(28000)
Retained Earnings 31 dec 2017	$982400