In 2013, Compliance Industries changed its method of inventory valuation. The summary effect of those changes is as follows:
...........................................................................Old Method ........New Method
Cost of goods sold-2013 . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $25,000 ............$19,000
Cost of goods sold-2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29,000 .............. 21,000
Cost of goods sold-2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31,000 .............. 24,000
Cost of goods sold-2010 and before . . . . . . . . . . . . . . . . . . . . . . . . . .51,000 ............. 38,000
Net income was $128,000, $119,000, and $98,000 for 2013, 2012, and 2011, respectively. The income tax rate is 30%.
1. Compute the reported net income for each year if three years of financial statements are issued at the end of 2013.
2. Compute the amount of adjustment that would be made to Retained Earnings as of January 1, 2011?