Barney Corporation began business on Jan 1, 2006. The company has released the following financial statements for 2006 and 2007 and has the following proposed statements for 2008.
Barney Corp
Comparative Balance Sheets
Dec 31
2008 2007 2006
Assets
Cash $249,000 $219,000 $165,000
Capitalized Exploration Costs $60,000 $45,000 $30,000
Equipment $150,000 $150,000 $150,000
Accumulated Depreciation-Equipment $(45,000) $(30,000) $(15,000)
Total Assets: $414,000 $384,000 $330,000
Liabilities and stockholders equity
Current Liabilities $177,000 $177,000 $147,000
Common Stock 165,000 165,000 165,000
Retained Earnings 72,000 42,000 18,000
Total Liabilities and stockholders equity $414,000 $384,000 $330,000
Barney Corp
Comparative Income Statements
For the Years Ended Dec 31
2008 2007 2006
Sales $315,000 $300,000 $255,000
Cost of Goods Sold $240,000 $225,000 $189,000
Administrative Expenses 12,500 23,500 28,000
Amortization of Capitalized exploration Costs 17,500 12,500 5,000
Depreciation expense-equipment 15,000 15,000 15,000
Total Costs $285,000 $276,000 $237,000
Net Income $30,000 $24,000 $18,000
Barney Corp acquired the equipment for $150,000 on Jan 1 2006, and began depreciating the equipment over a 10-year estimated useful life with no salvage value, using the straight line method of depreciation.
The capitalized exploration costs reflect oil and gas drilling costs that Barney has capitalized under the full cost method.
As of Jan 1, 2008 Barney has decided to make the following changes:
(a)For justifiable reasons, Barney Corp changed to the double-declining-balance method of depreciation for the equipment as of Jan 1, 2008
(b)For justifiable reasons, Barney Corp changed from the full cost to the successful efforts method of accounting for oil and gas drilling costs as of Jan 1,2008. Under the successful method, all drilling costs are expensed as incurred . This change is a change in accounting principle.
Instructions: In a 3 year comparative format, prepare the balance sheets, statements of income, and statements of retained earnings that would be reported in 2008 for the years 2006,2007 and 2008. Barney has yet to pay any dividends. Make sure to correctly treat the accounting changes mentioned
above.(Ignore any tax effects).
Check figures hint: 2008 retained earning( deficit)= ($3,000)
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