Answered Essay: Presented below are the comparative income and retained earnings statements for Blue Inc. for the years 2017 and 2018.

Presented below are the comparative income and retained earnings statements for Blue Inc. for the years 2017 and 2018.

2018 2017
Sales $353,000 $276,000
Cost of sales 195,000 150,000
Gross profit 158,000 126,000
Expenses 89,600 49,100
Net income $68,400 $76,900
Retained earnings (Jan. 1) $121,500 $69,900
Net income 68,400 76,900
Dividends (30,800 ) (25,300 )
Retained earnings (Dec. 31) $159,100 $121,500

The following additional information is provided:

1. In 2018, Blue 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 $102,500 with an estimated useful life of 4 years and no salvage value. (The 2018 income statement contains depreciation expense of $30,750 on the assets purchased at the beginning of 2017.)
2. In 2018, the company discovered that the ending inventory for 2017 was overstated by $21,900; ending inventory for 2018 is correctly stated.

Prepare the revised retained earnings statement for 2017 and 2018, assuming comparative statements. (Ignore income taxes.)

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