Question

In 2016, Dalia Corp., a calendar fiscal-year company, discovered that depreciation expense was erroneously overstated $65,000 in both 2014 and 2015 for financial reporting purposes. Net income in 2016 is correct. The tax rate is 35%. The error was made only for financial reporting, affecting depreciation and deferred income tax accounts. CCA had been recorded correctly, and thus there will be no change in taxes payable.

Additional information:

2016 2015

Beginning retained earnings $452,000 $429,000

Earnings (includes error in 2015) 85,000 95,500

Dividends declared 62,000 72,500

Required:
1. Record the entry in 2016 to correct the error. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

2. Prepare the comparative retained earnings section of the statement of changes in shareholders’ equity for 2015, reflecting the change.

DALIA CORPORATION
Retained Earnings Statement
For the Year Ended 31 December
	2016	2015
Beginning retained earnings, as previously reported
Error correction, depreciation, net and tax.
Beginning balance restated
Earnings (restated for 2015)
Dividends declared
Ending balance

Answer 1