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Presented below are the comparative income and retained earnings statements for Martinez Inc. for the years 2017 and 2018. 2018 2017 Sales $334,000 $264,000 Cost
Presented below are the comparative income and retained earnings statements for Martinez Inc. for the years 2017 and 2018.
2018 | 2017 | |||||
Sales | $334,000 | $264,000 | ||||
Cost of sales | 217,000 | 144,000 | ||||
Gross profit | 117,000 | 120,000 | ||||
Expenses | 95,200 | 50,700 | ||||
Net income | $21,800 | $69,300 | ||||
Retained earnings (Jan. 1) | $121,700 | $76,300 | ||||
Net income | 21,800 | 69,300 | ||||
Dividends | (31,400 | ) | (23,900 | ) | ||
Retained earnings (Dec. 31) | $112,100 | $121,700 |
The following additional information is provided:
1. | In 2018, Martinez 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 $106,500 with an estimated useful life of 4 years and no salvage value. (The 2018 income statement contains depreciation expense of $31,950 on the assets purchased at the beginning of 2017.) | |
2. | In 2018, the company discovered that the ending inventory for 2017 was overstated by $24,200; ending inventory for 2018 is correctly stated. Prepare the revised retained earnings statement for 2017 and 2018, assuming comparative statements. (Ignore income taxes.) MARTINEZ INC. Retained Earnings Statement For the Year Ended |
2017 2018
2017 | ||
RETAINED EARNINGS, JANUARY 1, UNADJUSTED | ||
LESS: CORRECTION OF ERROR FOR INVENTORY OVERSTATEMENT | ||
RETAINED EARNINGS, JANUARY 1, ADJUSTED | ||
ADD: NET INCOME | ||
LESS: DIVIDENDS | ||
RETAINED EARNING, DECEMBER 31 |
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