Thompson 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 1,350,000 1,320,000 Cost of Goods Sold (775,000) (767,500) Gross Profit 575,000 552,500 Depreciation (112,500) (107,500) Other Expenses (162,050) (153,050) Net Income 300,450 291,950 Thompson's records reveal the following information After preparing the preliminary financial statements, Thompson decided to change the depreciation method on its office equipment from double declining balance to straight line The equipment had an original cost of $100,000 when purchased on January 1, 2018 It has a 10 year useful life and no salvage value After preparing the preliminary financial statements, Thompson discovered errors in its inventory taking procedures that have caused inventories for the last 3 years to be incorrect, as follows December 31, 2018 Overstated $12,000 December 31, 2019 Understated $17,700 December 31, 2020 Overstated $10,500 Thompson purchased equipment on January 3, 2016 It originally cost $180,000 and, for depreciation purposes, the straight line method was chosen The asset was originally expected to be useful for 15 years and have a zero residual value In 2020, the decision was made to shorten the total life of this asset to 9 years and to estimate the residual value at $3,000, but the preliminary financial statements were prepared using the old estimate Thompson purchased a $36,000 insurance policy on July 1, 2018, that expires on June 30, 2022 When the preliminary financial statements were reviewed, it was discovered that the original payment had been charged to insurance expense Required A Prepare the necessary journal entries at December 31, 2020, to record the above information B Prepare new comparative income statements to reflect the adjustments required (1) through (4) above You may ignore income taxes C Retained earnings reported for the end of 2019 was $2,067,950 and at the end of 2018 was $1,876,000 Dividends of $100,000 were declared in each year Prepare comparative statements of retained earnings for Thompson Company for 2020 and 2019, reflecting appropriate adjustments from items (1) (4) above, ignoring income taxes

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Thompson 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

Thompson 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	1,350,000	1,320,000
Cost of Goods Sold	(775,000)	(767,500)
Gross Profit	575,000	552,500
Depreciation	(112,500)	(107,500)
Other Expenses	(162,050)	(153,050)
Net Income	300,450	291,950

Thompson's records reveal the following information:

After preparing the preliminary financial statements, Thompson decided to change the depreciation method on its office equipment from double-declining-balance to straight-line. The equipment had an original cost of $100,000 when purchased on January 1, 2018. It has a 10-year useful life and no salvage value.

After preparing the preliminary financial statements, Thompson discovered errors in its inventory-taking procedures that have caused inventories for the last 3 years to be incorrect, as follows.

December 31, 2018	Overstated	$12,000
December 31, 2019	Understated	$17,700
December 31, 2020	Overstated	$10,500

Thompson purchased equipment on January 3, 2016. It originally cost $180,000 and, for depreciation purposes, the straight-line method was chosen. The asset was originally expected to be useful for 15 years and have a zero residual value. In 2020, the decision was made to shorten the total life of this asset to 9 years and to estimate the residual value at $3,000, but the preliminary financial statements were prepared using the old estimate.

Thompson purchased a $36,000 insurance policy on July 1, 2018, that expires on June 30, 2022. When the preliminary financial statements were reviewed, it was discovered that the original payment had been charged to insurance expense.

Required:

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

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

C. Retained earnings reported for the end of 2019 was $2,067,950 and at the end of 2018 was $1,876,000. Dividends of $100,000 were declared in each year. Prepare comparative statements of retained earnings for Thompson Company for 2020 and 2019, reflecting appropriate adjustments from items (1)-(4) above, ignoring income taxes.