BNSF has a retained earnings balance of $430,000 on January 1, 2023. During the year, it reported net income of $60,000 and paid out cash dividends of $8,900. In April 2023, BNSF's auditor discovered that the company understated its sales revenues of 2020 with a net of tax amount of $7,500. How the correction of this error would affect BNSF's 2023 financial statements? No effect because revenue was understated in 2020 instead of 2023. January 1's retained earnings would be adjusted to be $437,500. Net income of 2023 would decrease by $7,500 to be $52,500. O December 31's retained earnings would be $481,100.
BNSF has a retained earnings balance of $430,000 on January 1, 2023. During the year, it reported net income of $60,000 and paid out cash dividends of $8,900. In April 2023, BNSF's auditor discovered that the company understated its sales revenues of 2020 with a net of tax amount of $7,500. How the correction of this error would affect BNSF's 2023 financial statements? No effect because revenue was understated in 2020 instead of 2023. January 1's retained earnings would be adjusted to be $437,500. Net income of 2023 would decrease by $7,500 to be $52,500. O December 31's retained earnings would be $481,100.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:BNSF has a retained earnings balance of $430,000 on January 1, 2023. During the year, it reported net
income of $60,000 and paid out cash dividends of $8,900. In April 2023, BNSF's auditor discovered
that the company understated its sales revenues of 2020 with a net of tax amount of $7,500. How the
correction of this error would affect BNSF's 2023 financial statements?
No effect because revenue was understated in 2020 instead of 2023.
January 1's retained earnings would be adjusted to be $437,500.
Net income of 2023 would decrease by $7,500 to be $52,500.
O December 31's retained earnings would be $481,100.
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