Reference no: EM132629201
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.