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During its first 3 years of operations, Lee reported net income and
declared dividends as follows.
Net income
Dividends declared
2004
$ 40,000
2005
125,000
2006
160,000
$ –0–
50,000
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%
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ACC 545 Week 5 Team Investments and Marketable Securities
Discussion
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