E22-7B (Change in Estimate and Error; Financial Statements) Presented below are the comparative statements for Titan Company. 2013 2014 Sales $640,000 $890,000 Cost of sales 480,000 565,000 Gross profit 160,000 325,000 Expenses 60,000 106,000 Net income $

E22-7B (Change in Estimate and Error; Financial Statements) Presented below are the comparative statements for Titan Company.
                                                      2013                                2014       
Sales                                          $640,000                          $890,000
Cost of sales                                480,000                            565,000
Gross profit                                 160,000                            325,000
Expenses                                       60,000                            106,000
Net income                                 $100,000                         $219,000
Retained earnings (Jan. 1)          $680,000                         $740,000
Net income                                  100,000                            219,000
Dividends                                    (40,000)                           (85,000)
Retained earnings (Dec. 31)       $740,000                         $874,000
The following additional information is provided:
1. In 2014, Titan decided to switch its depreciation method from the straight-line method to the double-declining-balance method. The assets were purchased at the beginning of 2013 for $200,000 with an estimated useful life of 5 years and no salvage value. (The 2014 income statement contains depreciation expense of $40,000.)
2. In 2014, the company discovered that the ending inventory for 2013 was understated by $33,000; ending inventory for 2014 is correctly stated.
Instructions
Prepare the revised income and retained earnings statement for 2013 and 2014, assuming comparative statements.