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Presented below are the comparative income and retained earnings statements for Waterway Inc. for the years 2017 and 2018. 2018 2017 $204,000 $181,000 Sales Cost of Sales 75,000 70,000 Gross Profit 129,000 111,000 56,000 57,000 Expenses $72,000 $55,000 Net Income Retained Earnings (Jan. 1) $141,000 $105,000 Net Income 72,000 55,000 (27,000 ) Dividends (19,000 ) $186,000 $141,000 Retained Earnings (Dec. 31) In 2018, Waterway Inc. decided to switch its depreciation method from double-declining balance to the straight-line method. The depreciable assets were purchased at the beginning of 2017 for $49,000 with an estimated useful life of 5 years and no salvage value. The 2018 income statement above contains depreciation expense of $11,760 on these assets. 1. In 2018, the company discovered that the ending inventory for 2017 was understated by $9,700; ending inventory for 2018 is correctly stated. 2. Prepare the revised retained earnings statement for 2017 and 2018, assuming comparative statements. WATERWAY INC. Retained Earnings Statement For the Year Ended 2018 2017 2$ In 2018, Shamrock Inc. decided to switch its depreciation method from double-declining balance to the straight-line method. The depreciable assets were purchased at the beginning of 2017 for $47,000 with an estimated useful life of 5 years and no salvage value. The 2018 income statement above contains depreciation expense of $11,280 on these assets. 1. In 2018, the company discovered that the ending inventory for 2017 was understated by $8,800; ending inventory for 2018 is correctly stated. 2. Prepare the revised retained earnings statement for 2017 and 2018, assuming comparative statements. SHAMROCK INC. Retained Earnings Statement For the Year Ended 2018 2017 2$ Retained Earnings, January 1, Unadjusted 177000 Less Correction of Error for Inventory Understatement -8800 Retained Earnings, January 1, Adjusted 131000 168200 Net Income / (Loss) 51000 Add 71000 Dividends Less -25000 -20000 162000 Retained Earnings, December 31 214200