Hinckley Company is in the process of adjusting its books at the end of 2015. Hinckley's records reveal the following information:

(a) Hinckley failed to accrue sales commissions at the end of 2013 and 2014 as follows:

2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $22,000

2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,250

In each case, the sales commissions were paid (and expensed) in January of the following year.

(b) Errors in ending inventories for the last three years were discovered to be as follows:

2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $41,300 understated

2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54,200 overstated

2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,000 understated

The incorrect amount has already been recorded for 2015.

Instructions:

1. Prepare the necessary journal entries at December 31, 2015, to record the preceding information. Assume that the books are still open for 2015. Ignore all income tax effects.

2. Assume that the unadjusted retained earnings balance at the beginning of 2015 was $1,265,000 and that the unadjusted net income for 2015 was $300,000. Also assume that dividends of $175,000 were declared during 2015. Prepare a statement of retained earnings for Hinckley Company for 2015, reflecting appropriate adjustments from (1). Assume that there are no income taxes.