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Scobie Company began 2016 with a retained earnings balance of $142,400. During an examination of its accounting records on December 31, 2016, Scobie found it had made the following material errors, for both financial reporting and income tax reporting, during 2015.

1.	Depreciation expense of $15,000 inadvertently had been recorded twice for the same machine.
2.	No accrual had been made at year-end for interest; therefore, interest expense had been understated by $4,000.

Scobies net income after taxes during 2016 was $60,000. The company has been subject to a 30% income tax rate for the past several years. It declared and paid dividends of $13,000 during 2016.

Required:

1.	Prepare whatever journal entries in 2016 are necessary to correct Scobies books for its previous errors. Make your corrections directly to the Retained Earnings account.
2.	Prepare the statement of retained earnings for 2016.

Prepare whatever journal entries are necessary to correct Scobies books for its previous errors. Make your corrections directly to the Retained Earnings account on December 31. Additional Instructions

PAGE 1

Prepare Scobie Companys Statement of Retained Earnings for the year ended December 31, 2016. Additional Instructions

SCOBIE COMPANY

Statement of Retained Earnings

For Year Ended December 31, 2016

1	Retained Earnings, as Previously Reported, January 1, 2016
2	Prior Period Adjustments:
3	Correction of Overstatement in 2015 Depreciation
4	Correction of Understatement in 2015 Interest
5	Adjusted Retained Earnings, January 1, 2016
6	Add: Net income
7
8	Less: Cash Dividends
9	Retained Earnings, December 31, 2016

GENERAL JOURNAL

	DATE	ACCOUNT TITLE	POST. REF.	DEBIT	CREDIT
1
2
3
4
5
6
7
8

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