How would this discovery have an impact on the reporting of the Statement of Retained Earnings
. Presented below is information related to CHO Co. for the month of January 2018.
| Cost of Goods Sold | 202,000 | Salary expense | 61,000 |
| Freight-out | 7,000 | Sales discount | 8,000 |
| Insurance expense | 12,000 | Sales returns and allowances | 13,000 |
| Rent expense | 20,000 | Sales | 340,000 |
| Dividends | 1,000 |
Instructions: Prepare the closing entries. (Marks 4)
Q4. The retained earnings statement of XYZ Corporation on 31st December 2021 had the following balances:
| Balance, January 1 | SAR 165,000 | |
| Net income | 35,000 | |
| Dividends | (20,000) | |
| Balance, December 31 | $ 180,000 |
However, before issuing the report for the year ended December 31, 2021, it discover a SAR 20,000 error undervalued inventory that overstated the net income to be higher in 2020 and overvalued depreciation amount of $5,000 which understated net income in 2020.
How would this discovery have an impact on the reporting of the Statement of Retained Earnings for 2021? ?