ACC 545 Week 5 Individual Assignment Lee Corporation Equity Scenario

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 Review the following information:

 Lee Corporation, a U.S. company, began operations on January 1, 2004.

During its first 3 years of operations, Lee reported net income and declared dividends as follows.

 Net income              Dividends declared

2004              $ 40,000                                $ –0–

2005              125,000                                 50,000

2006              160,000                                 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%