BNSF has a retained earnings balance of $430,000 on January 1, 2023. During the year, it reported net income of $60,000 and paid out cash dividends of $8,900. In April 2023, BNSF's auditor discovered that the company understated its sales revenues of 2020 with a net of tax amount of $7,500. How the correction of this error would affect BNSF's 2023 financial statements? No effect because revenue was understated in 2020 instead of 2023. O January 1's retained earnings would be adjusted to be $437,500. O Net income of 2023 would decrease by $7,500 to be $52,500. O December 31's retained earnings would be $481,100.

BNSF has a retained earnings balance of $430,000 on January 1, 2023. During the year, it reported net income of $60,000 and paid out cash dividends of $8,900. In April 2023, BNSF's auditor discovered that the company understated its sales revenues of 2020 with a net of tax amount of $7,500. How the correction of this error would affect BNSF's 2023 financial statements? No effect because revenue was understated in 2020 instead of 2023. January 1 's retained earnings would be adjusted to be $437,500. Net income of 2023 would decrease by $7,500 to be $52,500. December 31's retained earnings would be $481,100