Gibson Products had beginning retained earnings of $2,000,000. During the year, Gibson paid cash dividends of $120,000 to preferred shareholders and $25,000 to common shareholders. Net income for the year was $600,000.

Required:
1. Reproduce the retained earnings T-account for the year starting with the beginning balance.
2. Determine what Gibson’s ending retained earnings is assuming that during the year they discover that net income was overstated by $28,000 in prior years due to an error. The error was corrected and the current year’s net income is correct.