Shown on the next page are the comparative financial statements for ABC Company. In 2022, the FASB released a new financial accounting standard which changed the way pension liabilities and expenses are accounted for. The pension expenses and pension liabilities (part of Accrued liabilities and Expenses on the financial statements) under the old approach (debit the expense and credit the liability) were $17,000 for 2022, $14,000 for 2021, and $36,000 for years prior to 2021. Accrued expenses and accrued liabilities under the new approach are $24,000 for 2022, $19,000 for 2021, and $43,000 for years prior to 2021. ABC Company is in a 30% tax bracket. Required: 1. Prepare journal entries on the following page to record the effect of the change in GAAP. The tax effect of the change must also be considered. 2. On the financial statements on the next page, draw a line through numbers that will change and enter the updated numbers, such that your finished product will be the comparative financial statements after accounting for the change in GAAP. Be sure to clearly show where the revised numbers will go. Show any computations. 2022 2021 2020 and earlier Pension expense old approach $17,000 $14,000 $36,000 Pension expense new approach 24,000 19,000 43,000 Difference Income tax effect Difference, net of tax General Journal Debit Credit

Balance Sheets 2022 2021 Current assets $ 20,000 $ 15,000 Plant & Equipment, net 160,000 176,000 Other assets 68,000 52,000 Total assets $ 248,000 $ 243,000 Accounts payable $ 12,000 $ 10,000 Accrued liabilities 29,143 40,429 Income taxes payable 6,857 8,571 Total liabilities 48,000 59,000 Common stock & APIC 93,000 93,000 Retained earnings 107,000 91,000 Total stockholders equity 200,000 184,000 Total liabilities and stockholders equity $ 248,000 $ 243,000

Income Statements Revenues $ 194,000 $ 180,000 Expenses 171,143 151,429 Net income before taxes 22,857 28,571 Income taxes 6,857 8,571 Net income $ 16,000 $ 20,000

Statements of Retained Earnings Retained earnings, beginning $ 91,000 $ 71,000 Net income 16,000 20,000 Retained earnings, ending $ 107,000 $ 91,000