While preparing its 2009 financial statements, Dek Corp. discovered computational errors in its 2008 and 2007 depreciation expense.  These errors resulted in overstatement of each year’s income by $25,000, net of income taxes.  The following amounts were reported in the previously issued financial statements:

I would go for something different.

2009 NI-180,000

2008 NI =150,000-25,000=125,000

and retained earnings beginning balance needs to be adjsuted only for year 2007, i.e. (25,000), because it is the beginning balance of the earliest year presented in the financial statements. Why would they put (50,000)? Since in year 2008 the NI is now showed correctly.

If comparatives were not given, i.e. only 2009 was presented, then it should have been R/E (50,000) and NI 180,000, but as per the fact pattern comparatives are being given.

I agree with cinnamon... We are presenting the comparative F/S here. Thus, since 2007 is not presented, only $25,000 for 2007 would be shown as an adjustment to beginning RE of 2008.

ssham1976, which book are you referring because I would advise you to get back to the author or academic support..

corrected 2008:

B/B 675,000

NI 125,000

E/B 800,000

The question is asking what needs to be presented. Before the co. showed 850,000 ending R/E balance...it needs to be 800,000 so a debit of 50,000 is needed. NI will be shown at its correct adjusted amount. Answer C is correct.