Exercise 22 9 Presented belaw are the comparative income and retained earnings s

Question

Exercise 22 9 Presented belaw are the comparative income and retained earnings statements for 1vanhoe Inc. for the years 2017 and 2018 2019 2017 5ales Cost of sales Gross prefit Expenses $337,000 181,000 156,000 92,500 03,500 $126,300 53,500 (28,100) $252,000 132,000 120,000 47,700 32,300 $77.300 72,300 (23,300) Retained earnings (Can. 1) Net income Ratained eamings (Doc. 31) The followino additional information is provided 1. In 2018, Ivanhoe Inc. decided to switch its depreciation method from sum-of-the-vears digits to the straight-line method. The assets were purchased at the beginning of 2017 for $97,500 with an estimated useful life of 4 years and no salvage value. (The 2 In 2018, the company disoavered that the ending inventory for 201 was overstated by $22,000; ending inventory for 2018 is correctly stabed Prepare the revised retained eamings statement for 2017 and 2018, assuming comparative statements. (1gnore income taxes.) 1100$126300 2018 income statemant contains deprociation expense of $29,250 an the assets purchased at tha beginning af 2017.) IVANHOE INC. Retained Earnngs Statement for the Year Ended

Explanation / Answer

Ans. Revised Retained Earning Statement for the year of 2018 and 2017

                                                                 IVANHOE INC.

                                                      RETAINED EARNING STATEMENT

                                                    FOR THE YEAR ENDED (in $)

                                                             2018                    2017

Sales                                                 337000                  252000

Cost of sales                                      159000*                 154000**

Gross Profit                                        178000                   98000

Expenses(92500-29250+24375)            87625    47700

Net income 90375    50300

Retained earning (jan 1)                       126300                    77300

Net income                                         90375                     50300

Dividend                                             (28100)                   (23300)

Retained earning (Dec 31)                   188575    104300

**Closing stock for the year of 2017 is overstated by 22000, that means cost of sales for the year of 2017 is decrease by $22000, Cost of sales (Op. stock+Purchase-closing stock)

So actual cost of sales for the year of 2017 is (132000+22000) = 154000

* closing stock of 2017 will be opening stock of 2018. that means op. stock of 2018 is overstated by 22000, so that cost of sales of 2018 increase by 22000

actual cost of sales after adjustment is (181000-22000) =159000

Note: Depreciation as per staright line method is = 97500/4 = 24375

depreciation charge = 29250

over charge in 2018 (29250-24375) = 4875

Related Questions

Navigate

• Browse (All)
• Browse E
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.