Prepare the revised retained earnings statement

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Question - Presented below are 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.).

Reference no: EM132435893

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