EI Greco Corporation's January 1, 2014 retained earnings balance was €1,850,000. EI Greco earned net income for the year €510,000 and paid total dividends of €210,000. The company discovered in early 2014 that depreciation expense had been understated by €50,000 in 2013 financial statements. The December 31, 2014 retained earnings balance is

Question

Quizplus · Accepted Answer

The correct retained earnings balance is calculated by adjusting the beginning balance for the prior period error, adding net income, and subtracting dividends: €1,850,000 - €50,000 (error) + €510,000 (net income) - €210,000 (dividends) = €2,100,000.

EI Greco Corporation's January 1, 2014 Retained Earnings Balance Was