Reference no: EM131832154

Problem - Presented below are the comparative income statements for Pannebecker Inc. for the years 2011 and 2012.

The following additional information is provided.

	2012	2011
Sales	$339,140	$270,340
Cost of sales	201,450	140,190
Gross profit	137,690	130,150
Expenses	88,360	47,390
Net income	$49,330	$82,760
Retained earnings (Jan. 1)	$129,690	$73,700
Net income	49,330	82,760
Dividends	(29,670)	(26,770)
Retained earnings (Dec. 31)	$149,350	$129,690

1. In 2012, Pannebecker 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 2011 for $95,500 with an estimated useful life of 4 years and no salvage value. (The 2012 income statement contains depreciation expense of $28,650 on the assets purchased at the beginning of 2011.)

2. In 2012, the company discovered that the ending inventory for 2011 was overstated by $17,056; ending inventory for 2012 is correctly stated.

Prepare the revised retained earnings statement for 2011 and 2012, assuming comparative statements. (Ignore income taxes.)