Lee Corporation Equity Act 545
Lee Corporation Equity Scenario • Review the following information: Lee Corporation, a U.S. company, began operations on January 1, 2004. During its first 3 years of operations, Lee reported net income and declared dividends as follows. Net income Dividends declared 2004 $ 40,000 $ –0– 2005 125,000 50,000 2006 160,000 50,000 The following information relates to 2007: Income before income tax $240,000 Prior period adjustment: understatement of 2005 depreciation expense (before taxes) $ 25,000 Cumulative decrease in income from change in inventory methods (before taxes) $ 35,000 Dividends declared (of this amount, $25,000 will be paid on January 15, 2008) $100,000 Effective tax rate 40% |Lee Corporation |
|Retained Earnings Statement |
|For the Year Ended December 31, 2007 |
|Balance, January 1, as | |$225,000* |
|reported....................................................................................| | |
|. | | |
|Correction for depreciation error (net of $10,000
|Retained Earnings Statement |
|For the Year Ended December 31, 2007 |
|Balance, January 1, as | |$225,000* |
|reported....................................................................................| | |
|. | | |
|Correction for depreciation error (net of $10,000