Kriveloff Company is in the process of closing its books at the end of 2017. The company's preliminary income statement for 2017 and its reported income statement for 2016 are given below.

2017 2016

Sales Revenues $ 900,000 $ 880,000

Cost of Goods Sold (450,000) (425,000)

Gross Profit 450,000 455,000

Depreciation (115,000) (115,000)

Other Expenses (108,000) (102,000)

Net Income $ 227,000 $ 238,000

Kriveloff's records reveal the following information:

(1) Kriveloff failed to accrue $7,000 of supplies expense at the end of 2016. The supplies expense was recorded as paid in 2017.

(2) On 1/1/15, Kriveloff purchased a machine for $120,000. Although the machine was expected to have a five-year life, it was erroneously expensed in recording the purchase. The appropriate depreciation method for this machine is double-declining-balance with no residual.

(3) At the end of 2017, Kriveloff decided to change its inventory costing method from average cost to the FIFO method. An analysis of the accounting records provides the following cost of goods sold amounts under average cost and FIFO:

Year FIFO Average

2015 410,000 430,000

2016 420,000 425,000

2017 432,000 450,000

(4) Kriveloff acquired a truck on 1/3/15 for $75,000 and estimated its useful life to be 6 years with a salvage value of $15,000. In 2017, after the preliminary statements were prepared, Kriveloff realized that the truck could be used for an additional 5 years, but that the salvage value at the end of that time would probably be only $10,000. Straight-line depreciation is being used.

Required:

A. Prepare the necessary journal entries at December 31, 2017, to record the above information.

B. Prepare new comparative income statements to reflect the adjustments required by items (1)-(3) above. You may ignore income taxes.

C. Retained earnings reported for the end of 2016 was $2,333,000 and at the end of 2015 was $2,195,000. Dividends of $100,000 have been declared in each year. Prepare comparative statements of retained earnings for Kriveloff Company, reflecting appropriate adjustments from items (1)-(3) above, ignoring income taxes.

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