Vaughn Corporation has retained earnings of $706,100 at January 1, 2017. Net income during 2017 was $1,638,400, and cash dividends declared and paid during 2017 totaled $83,100. Prepare a retained earnings statement for the year ended December 31, 2017. Assume an error was discovered: land costing $89,100 (net of tax) was charged to maintenance and repairs expense in 2014. (List items that increase retained earnings first.)

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Explanation: Retained earnings is the portion of net income accumulated in a company which can be used for future reinvestment purposes after the cumulative amount of dividends  declared have been deducted.

Solution- Using items that increase retained earnings first before any deduction

                              Vaughn Corporation

                             Retained earnings statements

                              Ended December 31st, 2017.

Retained Earnings as Reported on January 1st  $706,100

Correction for  Overstatement of expenses         $89.100

Retained earnings as adjusted =                            $795,200

(Add) Net income/loss                                           $1, 638,400

Net cash dividend (less)                                           -$83, 100

Retained Earnings in December 31st 2017           $2,350,500

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