At December 31, 2022, Cracker Company reported Retained Earnings of $20,000,000. In 2023, Cracker determined that 2021 amortization expense was understated by $1,500,000. In 2023, net income was $6,900,000 and dividends declared were $2,250,000. The company’s tax rate is 20%. Cracker issues comparative income statements and statements of stockholder’s equity for 2022, and 2023. Which of the following statements is true regarding the reporting for this error on Cracker Company’s comparative statements of stockholders’ equity? Answer a. The beginning balance of 2022 retained earnings will be increased for the correction of the error by $1,500,000. b. No adjustment to retained earnings for 2022 or 2023 is necessary because the error occurred in 2021. c. The beginning balance of 2022 retained earnings will be decreased for the correction of the error by $1,200,000. d. The beginning balance of 2023 retained earnings will be decreased for the correction of the error by $1,500,000.
At December 31, 2022, Cracker Company reported
Which of the following statements is true regarding the reporting for this error on Cracker Company’s comparative statements of stockholders’ equity?
Answer
The beginning balance of 2022 retained earnings will be increased for the correction of the error by $1,500,000.
No adjustment to retained earnings for 2022 or 2023 is necessary because the error occurred in 2021.
The beginning balance of 2022 retained earnings will be decreased for the correction of the error by $1,200,000.
The beginning balance of 2023 retained earnings will be decreased for the correction of the error by $1,500,000.
AI-generated content may present inaccurate or offensive content that does not represent bartleby’s views.
Unlock instant AI solutions
Tap the button
to generate a solution
