Since Goode Oil Company was formed in 2018 , it has used the full-cost method for financial reporting and recorded all exploration costs in an asset account called Oil and Gas Properties. At the beginning of 2020 , it changes to the successful-efforts method. Goode previously had reported pretax income of $2,013,000 and $2,121,000 in 2018 and 2019 , respectively. Analysis of the accounting records discloses that the company incurred the following exploration expenses based on the successful-efforts method: In 2020, Goode reported pretax income of $3,012,000 under the successful-efforts method. The tax rate is 35%. Goode has a simple capital structure with 100,000 shares of common stock outstanding. It paid no dividends. Required: 1. Prepare the journal entry to reflect the change in method at the beginning of 2020 . 2. If the company also presents the 2018 and 2019 financial statements for comparative purposes, prepare the income statement disclosures (starting with income before income taxes) and retained earnings disclosures that are required in 2020. 3. What items (if any) would be restated on the financial statements? CHART OF ACCOUNTS Goode Oil Company General Ledger ASSETS REVENUE 111 Cash 411 Sales Revenue 121 Accounts Receivable 141 Inventory EXPENSES 152 Prepaid Insurance 500 Exploration expenses 172 Oil and Gas Properties 511 Insurance Expense 181 Equipment 512 Utilities Expense 189 Accumulated Depreciation 521 Salaries Expense 532 Bad Debt Expense LIABILITIES 540 Interest Expense 211 Accounts Payable 541 Depreciation Expense 231 Salaries Payable 559 Miscellaneous Expenses 250 Unearned Revenue 910 Income Tax Expense 260 Deferred Tax Liability EQUITY 311 Common Stock 331 Retained Earnings Amount Descriptions Adjustment for the cumulative effect of accounting method change Balance at beginning of year, as previously reported Balance at beginning of year, as adjusted Balance at end of year Income before income taxes Net income Net loss 1. Prepare the journal entry to reflect the change on January 1,2020. General Journal Instructions 2a. If the company also presents the 2018 and 2019 financial statements for comparative purposes, prepare the income statement disclosures (starting with income before income taxes) that are required in 2020. Income Statements Instructions 2b. If the company also presents the 2018 and 2019 financial statements for comparative purposes, prepare the retained earnings disclosures that are required in 2020. 3. What items (if any) would be restated on the financial statements? Check all that apply. Oil and Gas Properties Accumulated Depreciation Deferred Tax Liability Exploration expenses Income tax expense Retained earnings Since Goode Oil Company was formed in 2018 , it has used the full-cost method for financial reporting and recorded all exploration costs in an asset account called Oil and Gas Properties. At the beginning of 2020 , it changes to the successful-efforts method. Goode previously had reported pretax income of $2,013,000 and $2,121,000 in 2018 and 2019 , respectively. Analysis of the accounting records discloses that the company incurred the following exploration expenses based on the successful-efforts method: In 2020, Goode reported pretax income of $3,012,000 under the successful-efforts method. The tax rate is 35%. Goode has a simple capital structure with 100,000 shares of common stock outstanding. It paid no dividends. Required: 1. Prepare the journal entry to reflect the change in method at the beginning of 2020 . 2. If the company also presents the 2018 and 2019 financial statements for comparative purposes, prepare the income statement disclosures (starting with income before income taxes) and retained earnings disclosures that are required in 2020. 3. What items (if any) would be restated on the financial statements? CHART OF ACCOUNTS Goode Oil Company General Ledger ASSETS REVENUE 111 Cash 411 Sales Revenue 121 Accounts Receivable 141 Inventory EXPENSES 152 Prepaid Insurance 500 Exploration expenses 172 Oil and Gas Properties 511 Insurance Expense 181 Equipment 512 Utilities Expense 189 Accumulated Depreciation 521 Salaries Expense 532 Bad Debt Expense LIABILITIES 540 Interest Expense 211 Accounts Payable 541 Depreciation Expense 231 Salaries Payable 559 Miscellaneous Expenses 250 Unearned Revenue 910 Income Tax Expense 260 Deferred Tax Liability EQUITY 311 Common Stock 331 Retained Earnings Amount Descriptions Adjustment for the cumulative effect of accounting method change Balance at beginning of year, as previously reported Balance at beginning of year, as adjusted Balance at end of year Income before income taxes Net income Net loss 1. Prepare the journal entry to reflect the change on January 1,2020. General Journal Instructions 2a. If the company also presents the 2018 and 2019 financial statements for comparative purposes, prepare the income statement disclosures (starting with income before income taxes) that are required in 2020. Income Statements Instructions 2b. If the company also presents the 2018 and 2019 financial statements for comparative purposes, prepare the retained earnings disclosures that are required in 2020. 3. What items (if any) would be restated on the financial statements? Check all that apply. Oil and Gas Properties Accumulated Depreciation Deferred Tax Liability Exploration expenses Income tax expense Retained earnings