In May 2015, the newly appointed controller of Butch Baking Corp. conducted a thorough review of past accounting, particularly of transactions that exceeded the companys normal level of materiality. As a result of his review, he instructed the companys chief accountant to correct two errors:

a. In 2012, the company made extensive improvements to the baking process and installed a substantial amount of new equipment. The entire cost of the process improvements and equipment was accidentally charged to income as restructuring expense in 2012. However, the equipment should have been capitalized and added to the factory equipment account. The cost of the equipment was $1,200,000. Butch depreciates its factory equipment on the straight-line basis over ten years. A full years depreciation is charged in the year that equipment is acquired.

b. A year-end cut-off error occurred in 2013. A large shipment of nonperishable supplies arrived from China on the last day of 2013 and had been left in the shipping containers outside the main plant. As a result, the supplies were recorded as received in 2014 and had not been included in the year-end 2013 inventory count. The account payable also had not been recorded in 2013. The supplies cost $160,000.

The companys tax rate is 20%

Required:

1. Prepare the necessary journal entry, if any, for part a to correct the accounts as of January 1, 2015.

2. Prepare the necessary journal entry, if any, for part b to correct the accounts as of January 1, 2015.

3. Prepare the journal entry for part b if the error was discovered at the end of 2014.

4. Prepare the retained earnings section of the SCE for the year ended December 31, 2015 assuming that retained earnings at 1 January 20X5 was $1,400,000; net income for 20x5 before tax was $710,000; and dividends of $350,000 were declared and paid during 20x5.