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.)