Question: Sparkle Inc a household products chain reported a prior period

Sparkle, Inc., a household products chain, reported a prior- period adjustment in 2014. An accounting error caused net income of 2013 to be understated by $ 12 million. Retained earnings at December 31, 2013, as previously reported, was $ 463 million. Net income for 2014 was $ 81 million, and 2014 dividends declared were $ 42 million.

1. Using the end- of- chapter summary problem (pages 637– 638) as an example, prepare the company’s statement of retained earnings for the year ended December 31, 2014. How does the ­prior- period adjustment affect Sparkle’s net income for 2014?

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