Presented below are the comparative income and retained earnings statements for Denise Habbe Inc. for the years 2020 and 2021.

The following additional information is provided:

1. In 2021, Denise Habbe 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 2020 for $100,000 with an estimated useful life of 4 years and no salvage value. (The 2021 income statement contains depreciation expense of $30,000 on the assets purchased at the beginning of 2020.)

2. In 2021, the company discovered that the ending inventory for 2020 was overstated by $24,000; ending inventory for 2021 is correctly stated.

Instructions

Prepare the revised retained earnings statement for 2020 and 2021, assuming comparative statements. (Ignore income taxes.)

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2021 2020 Sales $340,000 $270,000 Cost of sales 200,000 142,000 128,000 Gross profit 140,000 88,000 50,000 Expenses $ 52,000 $ 78,000 Net income Retained earnings (Jan. 1) $ 72,000 $125,000 Net income 52,000 78,000 (30,000) Dividends (25,000) Retained earnings (Dec. 31) $147,000 $125,000