Do you subtract depreciation expense from your retain earning statement if it was not recorded in the prior year.

Retain Earning $25,000
Net Income 12,000 = $37,000
Dividends - 5,000 = $32,000
Depreciation Expense +/- 3,000


My guess would be to subtract, which would give be a total of

$29,000

Please help!:confused:

Depreciation expense not recorded in the earlier year is an error and any correction will be made in the opening balance of the retained earnings:

Retained Earning brought forward $25,000
Adjustment for error- depreciation expense (3,000)
Revised retained earnings $22,000
Net Income for the year . . 12,000
Dividends . . . . . . . . . . . . (5,000)
Retained earnings carried forward $29,000