Question 1 In its Decem Der 31 2016 financial statements, sheridan Ltd reported

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Question 1 In its Decem Der 31 2016 financial statements, sheridan Ltd reported retained earnings f 79,000. During 2017, Sheridan eported net income after tax o $79,000 and paid diidends of S4 500 Also during 2017, Sheridan discovered that rent expense in 2016 was understated by $19,10 . Rent expense was recorded property to 2017. Sheridan as sub ect to a 20% ncome tax rate tor all afected years. Assuming that Sheridan reports under ASPC prepare the December 2017 statement of retained earnings r APre Sheridan Ltd. ded Decamber 31. 2

Explanation / Answer

STATEMENT OF RETAINED EARNINGS Retained earning balance as previously reported 479000 Correction of error in Calculating rent expensne 19100 Less: Applicable Income tax 20% 3820 15280 Rectified balance of Retained earnings on jan1, 2017 463720 Add: net income for 2017 79000 Less: Dividend paid -4500 Retained earnings balance on Dec31, 2017 538220

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