Question

signment CALCULATOR MESSAGE HY INSTRUCTOR FULL SCREEN PRINTER VERSION 4 BACK NEXT Exercise 22-9 Presented below are the comparative income and retained earnings statements for Nash Inc. for the years 2017 and 2018. 2017 334.000 95.200 Sales Cost of sales Gross profit Expenses Net income Retained earnings (Jan. 1) Net income Dividends Retained earnings (Dec. 31) $21,800 $264,000 144,000 120,000 50,700 $69,300 $76,300 69,300 (23,900) $121,700 214.800 (31,400) $112,100 $121,700 The following additional information is provided: In 2018, Nash 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 In 2018, the company discovered that the ending inventory for 2017 was overstated by $24.2003 ending Inventory for 2018 is correctly stated. Prepare the revised retained earnings statement for 2017 and 2018, assuming comparative statements. (Ignore Income taxes. MASILAC

Answer 1

NASH INC.
Retained Earnings Statement
For the year ended
	2018	2017
Unadjusted retained earnings, January 1	$121700
Less: correction of inventory overstated	$24200
Adjusted retained earnings, January 1	$97500	$76300
Add : Net income	$56650	$45100
Less: Dividend	$31400	$23900
Retained Earnings , December 31	$122750	$97500
calculation of depreciation charged
Cost	$106500
Less: Depreciation charged for 2017	$42600	(106500*4)/10
Book value at the beginning 2018	$63900
Depreciation charged in 2018 under SLM	$21300	(63900/3)
Depreciation actually charged	$31950
Depreciation overcharged	$10650
Net income calculation
For 2017 year
Net income	$69300
Less: Inventory overstated	$24200
	$45100
For 2018 year
Net income	$21800
Add: Inventory overstated in 2017	$24200
Add: Depreciation overstated	$10650
	$56650