The income statement of X Limited for 2020 reported the wrong profit figure because $10000 of goods had been counted twice when closing inventory was valued. This wrong inventory valuation was then brought forward and used as the opening inventory for 2021. In February 2021 the directors paid a dividend equal to $40\%$ of the profit for 2020. What were the consequences of the error in inventory valuation?
- Adividend paid in 2021: decrease of $4000; retained earnings at 31 December 2021: decrease of $4000
- Bdividend paid in 2021: decrease of $4000; retained earnings at 31 December 2021: increase of $14000
- Cdividend paid in 2021: increase of $4000; retained earnings at 31 December 2021: decrease of $4000
- Ddividend paid in 2021: increase of $4000; retained earnings at 31 December 2021: decrease of $14000