At January 1, 2017, Crane Company reported retained earnings of $2,190,000. In 2017, Crane discovered that 2016 depreciation expense was understated by $382,000. In 2017, net income was $929,000 and dividends declared were $226,000. The tax rate is 35%. Prepare a 2017 retained earnings statement for Crane Company.

Solution and Explanation:

The retained earning statement for the company Crane for the year 2017 is as follows:

                                                Martinez Company

                                                Retained Earnings Statement

                                 For the Year Ended December 31, 2017

Retained Earnings, January 1                                     $2,190,000

Less: Correction of Depreciation Error                         $382000

Retained Earnings, January 1, as adjusted                           $1,808000

Add: Net Income                                                                   $929000

Less: Dividends                                                                 $226000

Retained Earnings, December 31                                         $2,511000

Retained earnings at the starting year is to be considered and depreciation and dividend amount is to be deducted whereas the net income is to be added.  

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