The annual report of Andrew Peller Ltd. for fiscal year 2006 included the financial statements for fiscal year 2005, which were restated to reflect the effects of a fraudulent action by a former Andrew Peller employee. The restated financial statements included the following items and their account balances:

\section*{Required:}
1. Determine the balance of retained earnings for the year ending March 31, 2005, and prepare the shareholders' equity section of the statement of financial position as at March 31, 2005.
2. The company provided the following explanation for the prior period adjustment. Use the amounts shown in the "Adjustment" column on the following page to reconstruct the journal entry that was prepared to record the effect of the alleged fraud on the identified income statement and statement of financial position accounts.

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Share capital Retained earnings, beginning of year Profit Dividends declared Effect of prior period adjustment $ 7,375 79,260 8,467 3,109 593 Debit balance