Reference no: EM133163245

Question - The retained earnings account of William Company has a balance of 10.4 million of January 1, 2021. For the year ending December 31, 2021 William reported net income of 3.8 million. Before the financial statements were authorized for issue, an audit was conducted and the following items were determined:

1. On January 31,2020. William acquired a piece of equipment costing 1 million with an estimated useful of 10 years and a salvage value of 100,000. As per company policy, this equipment is to be depreciated using the straight-line method however no depreciation was recognized ever since its acquisition.

2. Total Credits Sales for the year 2021 amounted to 7 million while the accounts receivable will balance at the end of the year was 3.4 million. In the past years, Williams determines that Allowance for Bad Debts at 2% of total credits sales however for the year 2021, William decided to use 5% of the ending balance of accounts receivable in determining its allowance for bad debts. Due to confusion, the accountant failed to reflect the change in the record and still used the original method of estimating bad debts. There were no accounts written off or recovered during the year and the balance of the allowance for doubtful accounts on January 1, 2021 is 80,000.

3. Dividends declared during the year amount to 965,000 but were only recognized when the dividends were distributed in 2022.

4. A 2-year subscription was received from a client on July 31, 2021, amounting to 300,000. The company uses the liability method concerning advance payments. SO far, no adjustments were made yet.

Required - Determine the adjusted ending balance of retained earnings in 2021.