Alexander Company Reported the Ending Balance of Retained Earnings as $400,000

question 102

Multiple Choice

Alexander Company reported the ending balance of Retained earnings as $400,000 on December 31, 2013. During the first month of 2014, they discovered an error in the ledger which had the effect of overstating net income in 2013 by $45,000. At the end of 2014, they included this item as a prior period adjustment. Year 2014 results included $52,000 of net income and $15,000 of dividends paid. What amount would be shown as the ending balance of Retained earnings on the December 31, 2014 financial statements?

• A) $430,000
• B) $347,000
• C) $437,000
• D) $392,000

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Definitions:

Generally Accepted Accounting Principles

A standard framework of guidelines for financial accounting used in any given jurisdiction, typically known as GAAP.

Cash Flow Statement

The cash flow statement is a financial document that provides aggregate data regarding all cash inflows and outflows a company receives from its ongoing operations, investment activities, and financing activities.

Income Statement

A financial statement that shows a company's financial performance over a specific period, detailing revenues, expenses, and net income.