The Dayton Corporation began the current year with a retained earnings balance of $25,000. During the year, the company corrected an error made in the prior year, which was a failure to record depreciation expense of $3,000 on equipment. Also, during the current year, the company earned net income of $12,000 and declared cash dividends of $5,000. Compute the year end retained earnings balance.

Question

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The beginning retained earnings balance is $25,000. The prior year error correction reduces it by $3,000, resulting in $22,000. Adding the current year's net income of $12,000 gives $34,000. Subtracting the $5,000 dividends results in a year-end retained earnings balance of $29,000.

The Dayton Corporation Began the Current Year with a Retained