Joe Novak Corporation reports the following information:
Correction of overstatement of depreciation expense $\begin{array}{lr}
\text { in prior years, net of tax } & \$ 215,000 \
\text { Dividends declared } & 160,000 \
\text { Net income } & 500,000 \
\text { Retained earnings, } 1 / 1 / 07 \text { as reported } & 1,000,000
\end{array}$

Joe Novak should report retained earnings, 1/1/07, as adjusted at
A)$785,000.
B)$1,000,000.
C)$1,215,000.
D)$1,555,000.

Question

Joe Novak Corporation reports the following information: 
Correction of overstatement of depreciation expense $\begin{array}{lr}
\text { in prior years, net of tax } & \$ 215,000 \
\text { Dividends declared } & 160,000 \
\text { Net income } & 500,000 \
\text { Retained earnings, } 1 / 1 / 07 \text { as reported } & 1,000,000
\end{array}$

Joe Novak should report retained earnings, 1/1/07, as adjusted at
A)$785,000.
B)$1,000,000.
C)$1,215,000.
D)$1,555,000.

Quizplus · Accepted Answer

The correction of the overstatement of depreciation expense increases retained earnings by $215,000. Therefore, the adjusted retained earnings on 1/1/07 would be $1,000,000 + $215,000 = $1,215,000.

Joe Novak Corporation Reports the Following Information: Correction of Overstatement

Joe Novak Corporation Reports the Following Information:
Correction of Overstatement