During an audit of Madison Company's December 31, 2017 records it was discovered that the company did not accurately accrue for $12,500 of depreciation expense. As well as the accrual for interest expense was missed in the amount of $4,500. These errors occurred in 2016 and have a material impact on Madison's financial records. Madison's net income for the year was $123,000. The company is subject to a 3t% tax rate. The company had a retained earnings balance of $557,500 on January 1, 2017, no dividends were paid.

1) prepare the necessary journal entries to correct the accounting records of Madison Company's books.

2) prepare the statement of retained earnings for 2017.