At January 1, 2014, Baker Corp. reported retained earnings of $2 million. In 2014, Baker discovered that 2013 depreciation expense was understated in error by $500,000. In 2014, net income was $900,000 and dividends declared were $250,000. The tax rate is 25%. Baker follows ASPE, and the deferred taxes method of accounting for income taxes.
(a) Prepare a 2014 statement of retained earnings for Baker Corp.
(b) Briefly explain how your answer would change if Baker were to follow IFRS.