The infоrmаtiоn belоw relаtes to Cycle Ltd., а Canadian private company with an effective tax rate of 30%. Net loss for 2026 was $10,500. Retained earnings, January 1, 2026, was $120,000. Cash dividends declared in 2026 were $60,000 with $45,000 of those dividends not scheduled to be paid out until January 2027. In 2026, management determined a significant change in estimate related to their estimate of uncollectible amounts from customers. They think the impact would have decreased pre-tax net income by $20,000 in the previous year, if they would have known at that time. There was a change in accounting policy this year related to depreciation that resulted in a cumulative increase in prior years' income of $56,000 before tax. An inventory error was identified that resulted in an overstatement of net income by $45,000 in 2025 (pre-tax). Required: a) Prepare the Statement of Retained Earnings (in good form) for the year ended December 31, 2026 in the template provided below. (10 marks) b) For the items that you chose to adjust in opening retained earnings above, which two qualitative characteristics best supports the treatment you chose and why? (2 marks) Note: Extra rows have been provided in the template below to allow for spacing.
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