In

$20222022,$

MegMeg

Inc. discovered an error in its

$20192019$

financial statements. The firm recorded

$$$$11$ comma $000$ comma $00011,000,000$

of depreciation expense on its equipment instead of recording

$$$$10$ comma $000$ comma $00010,000,000.$

MegMeg

has a constant tax rate of

$4040\%$

and reports $3$ years of comparative income statements and $2$ years of comparative balance sheets with its financial reports. Assume that

MegMeg

uses the same depreciation method for tax and financial reporting. Retained earnings and accumulated depreciation as of December$31,$

$20212021,$

were

$$$$12$ comma $075$ comma $00012,075,000$

and

$$$$5$ comma $400$ comma $0005,400,000,$

respectively.

Read the

requirements

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$.$

Question content area bottom

Part $1$

Requirement a$.$ What is the necessary journal entry to record the$$ prior$-$period adjustment? $($Record debits$$ first, then credits. Exclude explanations from any journal$$ entries.$)$

Account

Current Year

Accumulated Depreciation

$1,000,000$

$$

Retained Earnings $-$ Prior Period Adjustment

$$

$600,000$

Income Tax Payable

$$

$400,000$

$$

$$

$$

Part $2$

Requirement b$.$ How would

MegMeg

report its accumulated depreciation and retained earnings balances in the restated balance sheet dated December$31,$

$20212021?$

These adjustments will be reported in the

$$

comparative statements. Thus,

the balances in retained earnings and accumulated depreciation presented for

$$

will be

$$

and

$$

respectively.