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How much should eagle retained earnings be retrospectively

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Reference no: EM132958196

Eagle Corp. is a calendar-year corporation whose financial statements for 2019 and 2020 included errors as follows:


Year             Ending Inventory             Depreciation Expense
2019           $36,000 overstated            $30,000 overstated
2020           12,000 understated            10,000 understated

Problem 1: Assume that purchases were recorded correctly and that no correcting entries were made at December 31, 2019 or December 31, 2020. Ignoring income taxes, by how much should Eagle's retained earnings be retrospectively adjusted at January 1, 2021?

a. $2,000 increase
b. $32,000 increase
c. $8,000 increase
d. $4,000 decrease

Reference no: EM132958196

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