Exercise 22-9

Presented below are the comparative income and retained earnings statements for Headland Inc. for the years 2017 and 2018.

		2018			2017
Sales		$316,000			$272,000
Cost of sales		185,000			143,000
Gross profit		131,000			129,000
Expenses		94,600			48,700
Net income		$36,400			$80,300
Retained earnings (Jan. 1)		$128,600			$75,700
Net income		36,400			80,300
Dividends		(31,800	)		(27,400	)
Retained earnings (Dec. 31)		$133,200			$128,600

The following additional information is provided:

1.		In 2018, Headland 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 $91,500 with an estimated useful life of 4 years and no salvage value. (The 2018 income statement contains depreciation expense of $27,450 on the assets purchased at the beginning of 2017.)
2.		In 2018, the company discovered that the ending inventory for 2017 was overstated by $22,000; ending inventory for 2018 is correctly stated.

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