While preparing its year 3 financial statements, Dek Corp. discovered computational errors in its year 2 and year 1 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:

Dek’s year 3 income is correctly reported at $180,000. Which of the following amounts should be adjusted to retained earnings and presented for net income in Dek’s year 3 and year 2 comparative financial statements?

This Answer is Correct (Answer is below)

This answer is correct. ASC Topic 250 requires that items of profit or loss related to the correction of an error in the financial statements of a prior period be accounted for and reported as prior period adjustments and excluded from the determination of net income for the current period. When comparative financial statements are prepared, it is necessary to adjust net income, its components, retained earnings balances, and other affected balances for all of the periods presented to reflect retroactive application of prior period adjustments. Hence, the amounts for each period must be stated in the comparative statements as if the errors had not occurred. Thus, both year 1 and year 2 net income and retained earnings would be retroactively reduced by $25,000 to reflect the correct amounts for each period. After these adjustments are made, the amounts for year 3 will be correctly stated. Note that this retroactive treatment is only used for presentation purposes in the comparative financial statements. The actual journal entry made to correct retained earnings at 1/1/Y3 is

I don't understand why the answer below is correct for this problem regardless of explanation above? Can please explain why this is the answer in a easier way so I can understand? Also why is retained earnings in Year 2 ($50,000)

While preparing its year 3 financial statements, Dek Corp. discovered computational errors in its year 2 and year 1 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:

Dek’s year 3 income is correctly reported at $180,000. Which of the following amounts should be adjusted to retained earnings and presented for net income in Dek’s year 3 and year 2 comparative financial statements?

This Answer is Correct (Answer is below)

This answer is correct. ASC Topic 250 requires that items of profit or loss related to the correction of an error in the financial statements of a prior period be accounted for and reported as prior period adjustments and excluded from the determination of net income for the current period. When comparative financial statements are prepared, it is necessary to adjust net income, its components, retained earnings balances, and other affected balances for all of the periods presented to reflect retroactive application of prior period adjustments. Hence, the amounts for each period must be stated in the comparative statements as if the errors had not occurred. Thus, both year 1 and year 2 net income and retained earnings would be retroactively reduced by $25,000 to reflect the correct amounts for each period. After these adjustments are made, the amounts for year 3 will be correctly stated. Note that this retroactive treatment is only used for presentation purposes in the comparative financial statements. The actual journal entry made to correct retained earnings at 1/1/Y3 is

I don't understand why the answer below is correct for this problem regardless of explanation above? Can please explain why this is the answer in a easier way so I can understand? Also why is retained earnings in Year 2 ($50,000)

A bicycle manufacturer buys 5000 tires a year from a distributor. It cost 6 to store one bicycle tire for a year. To re-order, there is a fixed cost of $24 per shipment plus $11 for each tire. How many times per year should the manufacturer order bicycle tires and in what lot size, to minimize inventory cost?

Suppose currently 10-year Treasury note offers 2.8% yield and the average yield on investment grade 10-year corporate bonds is 4.4%. Calculate the risk spread. Predict what will happen to the yields of corporate and treasury bonds as well as the risk spread if the federal government guarantees today that it will pay to bondholders if the corporations go bankrupt in the future.

•Note the following yields: 10 year treasury 2.37%, 10 year AAA rated bond credit spread 0.90% (90 basis points), BBB rated bond credit spread 1.20% (120 basis points). What is the price of a 10 year bond, $1000 par value, with a coupon rate of 6% that pays interest semi-annually and has risk similar to a BBB rated corporate bond?

•Suppose Company X has earnings next year of $1.00 and grows earnings by 40% for 2 years and will grow earnings thereafter by 4%. It pays no dividends until year 4, where it will then initiate a 50% dividend payout rate. If the cost of equity capital is 12%, what is the price of the stock?

Your lender now offers you a 30-year fixed-rate mortgage with 3.6% interest rate per year. If you can afford a monthly payment of $1725, what is the maximum loan you can get? (round to nearest dollar.)