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Presented below are the comparative income and retained earnings statements for Blue Inc. for the years 2017 and 2018.
| 2018 | 2017 | |||||
| Sales | $353,000 | $276,000 | ||||
| Cost of sales | 195,000 | 150,000 | ||||
| Gross profit | 158,000 | 126,000 | ||||
| Expenses | 89,600 | 49,100 | ||||
| Net income | $68,400 | $76,900 | ||||
| Retained earnings (Jan. 1) | $121,500 | $69,900 | ||||
| Net income | 68,400 | 76,900 | ||||
| Dividends | (30,800 | ) | (25,300 | ) | ||
| Retained earnings (Dec. 31) | $159,100 | $121,500 | ||||
The following additional information is provided:
| 1. | In 2018, Blue 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 $102,500 with an estimated useful life of 4 years and no salvage value. (The 2018 income statement contains depreciation expense of $30,750 on the assets purchased at the beginning of 2017.) | |
| 2. | In 2018, the company discovered that the ending inventory for 2017 was overstated by $21,900; 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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