Question

Tuscan Inc. had a retained earnings balance of $60,000 at December 31, 2018. During the year, Tuscan had the following selected transactions. Reported net income of $100,000. Revised an estimate of a machine’s salvage value. Depreciation increased by $1,000 per year. An error was discovered. Three years ago, a purchase of a building was incorrectly expensed. The effect is understated retained earnings of $12,000 (net of tax benefit). Paid cash dividends of $33,000. Calculate the retained earnings balance at December 31, 2019. (Amounts to be deducted should be indicated with a minus sign.)

Answer 1

Answer:

$139,000

Explanation:

The computation of the retained earnings balance at December 31, 2019 is shown below:

= Beginning retained earning balance + depreciation charged yearly + net income - cash dividend paid

= $60,000 + $12,000 + $100,000 - $33,000

= $139,000

The depreciation in yearly is

= $1,000 × 12 months

= $12,000

Basically we applied the above formula to determine the ending balance