Problem: Presented below is the comparative income and retained earnings statements for Carla Inc. for the years 2017 and 2018.
|
|
2018
|
2017
|
|
Sales
|
$306,000
|
$288,000
|
|
Cost of sales
|
187,000
|
131,000
|
|
Gross profit
|
119,000
|
157,000
|
|
Expenses
|
89,100
|
54,900
|
|
Net income
|
$29,900
|
$102,100
|
|
Retained earnings (Jan. 1)
|
$144,600
|
$66,000
|
|
Net income
|
29,900
|
102,100
|
|
Dividends
|
-30,200
|
-23,500
|
|
Retained earnings (Dec. 31)
|
$144,300
|
$144,600
|
The following additional information is provided:
1. In 2018, Carla Inc. decided to switch its depreciation method from sum-of-the-years' digits to the straight-line method. The assets were purchased at the beginning of 2017 for $101,500 with an estimated useful life of 4 years and no salvage value. (The 2018 income statement contains depreciation expense of $30,450 on the assets purchased at the beginning of 2017.)
2. In 2018, the company discovered that the ending inventory for 2017 was overstated by $24,900; ending inventory for 2018 is correctly stated.
Prepare the revised retained earnings statement for 2017 and 2018, assuming comparative statements. (Ignore income taxes).
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