During an audit of Madison Company's December 31, 2020 records it was discovered that the company...

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During an audit of Madison Company's December 31, 2020 records it was discovered that the company did not accurately accrue for $12,500 of depreciation expense. The accrual of interest expense of $4,500 was also omitted. These errors occurred in 2019 and have a material impact on Madison's financial records. Madison's net income for the year was $123,000. The company is subject to a 35% tax rate. The company had a retained earnings balance of $557,500 on January 1, 2020. No dividends were paid. Required: 1. Prepare the necessary journal entries to correct the accounting records of Madison Company's books. 2. Prepare the statement of retained earnings for 2020. Amount Descriptions Adjusted retained earnings, January 1, 2020 Correction of overstatement of 2019 depreciation Correction of overstatement of 2019 interest Correction of understatement of 2019 depreciation Correction of understatement of 2019 interest Net income Net loss Retained earnings, as previously reported, January 1, 2020 Retained earnings, December 31, 2020 During an audit of Madison Company's December 31, 2020 records it was discovered that the company did not accurately accrue for $12,500 of depreciation expense. The accrual of interest expense of $4,500 was also omitted. These errors occurred in 2019 and have a material impact on Madison's financial records. Madison's net income for the year was $123,000. The company is subject to a 35% tax rate. The company had a retained earnings balance of $557,500 on January 1, 2020. No dividends were paid. Required: 1. Prepare the necessary journal entries to correct the accounting records of Madison Company's books. 2. Prepare the statement of retained earnings for 2020. Amount Descriptions Adjusted retained earnings, January 1, 2020 Correction of overstatement of 2019 depreciation Correction of overstatement of 2019 interest Correction of understatement of 2019 depreciation Correction of understatement of 2019 interest Net income Net loss Retained earnings, as previously reported, January 1, 2020 Retained earnings, December 31, 2020

Answer rating: 100% (QA)

It was observed that the company did not charge the accrued depreciation and interest for ... View the full answer