(Change in Estimate and Error; Financial Statements) Presented below are the comparative income statements for Pannebecker Inc. for the years 2011 and 2012.
|
2012 |
2011 |
|
|
Sales |
$340,000 |
$270,000 |
|
Cost of sales |
200,000 |
142,000 |
|
Gross profit |
140,000 |
128,000 |
|
Expenses |
88,000 |
50,000 |
|
Net income |
$ 52,000 |
$ 78,000 |
|
Retained earnings (Jan. 1) |
$125,000 |
$ 72,000 |
|
Net income |
52,000 |
78,000 |
|
Dividends |
(30,000) |
(25,000) |
|
Retained earnings (Dec. 31) |
$147,000 |
$125,000 |
The following additional information is provided.
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 $90,000 with an estimated useful life of 4 years and no salvage value. (The 2012 income statement contains depreciation expense of $27,000 on the assets purchased at the beginning of 2011.)
2. In 2012, the company discovered that the ending inventory for 2011 was overstated by $20,000; ending inventory for 2012 is correctly stated.
Instructions
Prepare the revised retained earnings statement for 2011 and 2012, assuming comparative statements.