Report a prior-period adjustment on the statement of retained earnings
Response to the following problem:
Sparkle, Inc., a household products chain, reported a prior-period adjustment in 2014. An accounting error caused net income of 2013 to be understated by $12 million. Retained earnings at December 31, 2013, as previously reported, was $463 million. Net income for 2014 was $81 million, and 2014 dividends declared were $42 million.