(L02,3) (Change in Estimate and Error; Financial Statements) Presented below are the comparative income and retained earnings statements for Denise Habbe Inc. for the years 2017 and 2018.

2018 2017 Sales $340,000 $270,000 Cost of sales 200,000 142,000 Gross profi t 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 2018, Denise Habbe 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 $100,000 with an estimated useful life of 4 years and no salvage value.

(The 2018 income statement contains depreciation expense of $30,000 on the assets purchased at the beginning of 2017.)

2. In 2018, the company discovered that the ending inventory for 2017 was overstated by $24,000; ending inventory for 2018 is correctly stated.

Instructions Prepare the revised retained earnings statement for 2017 and 2018, assuming comparative statements. (Ignore income taxes.)