A CPA was engaged by Blackbird Company in 2011 to examine its books and records and to make whatever corrections are necessary. An examination of the accounts discloses the following.

(a) Dividends had been declared on December 15 in 2008 and 2009 but had not been entered in the books until paid.

(b) Improvements in buildings and equipment of $10,800 had been debited to expense at the end of April 2007. Improvements are estimated to have 12-year life. The company uses the straight-line method in recording depreciation and computes depreciation to the nearest month.

(c) The physical inventory of merchandise had been understated by $3,200 at the end of 2008 and by $4,750 at the end of 2009.

(d) The merchandise inventories at the end of 2009 and 2010 did not include merchandise that was then in transit and to which the company had title. These shipments of $2,100 and $2,900 were recorded as purchases in January of 2010 and 2011, respectively.

(e) The company had failed to record sales commissions payable of $3,600 and $1,100 at the end of 2009 and 2010, respectively.

(f ) The company had failed to recognize supplies on hand of $850 and $1,720 at the end of 2009 and 2010, respectively.

The retained earnings account appeared as shown below on the date the CPA began the examination.

Instructions:
1. Journalize the necessary corrections.
2. Prepare a statement of retained earnings covering the 3-year period beginning January 1, 2008. The statement should report the corrected Retained Earnings balance on January 1, 2008, the annual changes in the account, and the corrected Retained Earnings balances as of December 31, 2008, 2009, and 2010.
3. Set up an account for retained earnings before correction, and post correcting data to this account for (1). Balance the account, showing the corrected retained earnings as of January 1,2011.

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Account: RETAINED EARNINGS Balance Date tem Debit Credit Jan Balance Dec Net income for year 65.000 93.000 28,000 15,500 17,800 15,500 77,500 98,500 80,700 Jan. 10 Dividends paid Mar Stock sold excess over 21,000 Dec 3Net loss for year 2010 Jan. 0 Dividends paid Dec 3 Net loss for year 65,200 45,900 19,300