The following information is available for Xainy Corporation:

Retained Earnings, December 31, 2019 $1,500,000

Net Income for the year ended December 31, 2020 $ 200,000

The company accountant, in preparing financial statements for the year ending December 31, 2020, has discovered the following information:

The company's previous bookkeeper, who has been fired, had recorded depreciation expense on equipment in 2019 and 2020 using the double-declining-balance method of depreciation. The bookkeeper neglected to use the straight-line method of depreciation which is the company's policy. The cumulative effects of the error on prior years was $25,000, ignoring income taxes. Depreciation was computed by the straight-line method in 2020.

Instructions

(a) Prepare the entry for the prior period adjustment.

(b) Prepare the retained earnings statement for 2020.