OBrien Company is in the process of closing its books at the end of 2020. The company's preliminary income statement for 2020 and its reported income statement for 2019 are given below.

			2020		2019
Sales Revenues			675,000		660,000
Cost of Goods Sold			(427,500)		(428,750)
Gross Profit			247,500		231,250
Depreciation			(56,250)		(53,750)
Other Expenses			(81,020)		(76,520)
Net Income			110,230		100,980

OBrien's records reveal the following information:

1. In examining the preliminary financial statements, OBrien realized that it failed to accrue sales commissions at the end of each of the last two years. OBrien should have accrued $3,500 at the end of 2019 and $2,500 at the end of 2020.

2. OBrien purchased equipment on January 2, 2017, that cost $70,000 and had a useful life of 10 years and zero salvage value. The straight-line method of depreciation was originally chosen. However, in reviewing the preliminary financial statements, OBrien decided to change the depreciation method from straight-line to sum-of-the-years'-digits; the estimates relating to useful life and salvage value remained unchanged.

3. At the end of 2020, OBrien decided to change its inventory costing method from FIFO cost to the Average method. An analysis of the accounting records provides the following cost of goods sold amounts under average cost and FIFO:

Year FIFO Average

2018 426,500 428,000

2019 428,750 430,000

2020 427,500 432,000

OBrien purchased equipment on July 2, 2016. The asset's original cost was $30,000, and this amount was entirely expensed in 2016. This particular asset has a 10-year useful life and a $5,000 residual value. The straight-line method was chosen for depreciation purposes.

Required:

1. Prepare the necessary journal entries at December 31, 2020, to record the above information.

2. Prepare new comparative income statements to reflect the adjustments required (1) through (4) above. You may ignore income taxes.

3. Retained earnings reported for the end of 2019 was $696,380 and at the end of 2018 was $625,400. Dividends of $30,000 were declared in each year. Prepare comparative statements of retained earnings for OBrien Company for 2020 and 2019, reflecting appropriate adjustments from items (1)-(4) above, ignoring income taxes.