Answer:
A. $816,000
B. Dr Inventory $60,000
Cr Retained earning $36,000
Cr Tax payable $24,000
Explanation:
A. Calculation to determine the balance in retained earnings at the time of the change
Using this formula
Retained earnings = Beginning retained earning balance + Adjusted net income
Let plug in the formula
Retained earnings=$780,000+ $60,000 × (1 - 40%)
Retained earnings=$780,000+($60,000×60%)
Retained earnings=$780,00+ $36,000
Retained earnings= $816,000
Therefore the balance in retained earnings at the time of the change is $816,000
2. Preparation of the journal entry at the beginning of 2009 to record the change in principle.
Dr Inventory $60,000
Cr Retained earning $36,000
[$60,000 × (1 - 40%)]
Cr Tax payable $24,000
($60,000-$36,000)
(Being to record the change in principle)
