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Question;Lee Corporation Equity Scenario;Lee;Corporation is an American company that began operations on January 1, 2004. It has just completed its fourth full year of;operations on December 31, 2007. Ending;Year Balances for the prior year that ended on December 2006 were as follows;Retained;Earnings: $ 225,000;Common Stock at;par: $ 500,000;Additional;Paid-in Capital: $1,000,000;Treasury Stock: $ 200,000;Income;before taxes for 2007 totaled $240,000;Effective;Tax Rate was 40% for all years of operation including 2007;The;following information relates to 2007;1. An error was discovered during 2007. Specifically, depreciation expense was;understated in 2005 resulting in the need for a Prior Period Adjustment of;$25,000 before taxes.;2. Lee Corporation changed its method of;valuing inventory during 2007. The cumulative;decrease in income from the change in inventory methods was $35,000 before;taxes.;3. Lee Corporation declared cash dividends;of $100,000 in late 2007 to be paid out in 2008.;Lee acquired a Canadian subsidiary whose sole asset is a piece of;land. Lee acquired the subsidiary on;12/31/04 for the exact value of the land, CA $100,000. Lee owns 100% of the;subsidiary. Go to and use the historic lookup;feature to determine the exact exchange rates on 12/31/04, 12/31/05, and;12/31/06.;Requirements;1.;Prepare journal entries for items 1 to 3 above.;2.;Calculate and journalize the foreign exchange adjustments for 2005, 2006;and 2007 for the Canadian subsidiary.;3. Prepare a Retained Earnings Statement for;the year ended December 31, 2007.;4. Prepare a Statement of Changes in;Stockholders Equity for the year ended December 31;2007.


Paper#44855 | Written in 18-Jul-2015

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