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Lee Corporation Essay

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Below is an essay on "Lee Corporation" from Anti Essays, your source for research papers, essays, and term paper examples.

Lee Corporation began operations in January of 2004.   In 2007 an error was discovered in the 2005 financial statements that had depreciation expense understated by $25,000 before a tax rate of 40%.   Lee Corporation also made a change in the method used to value inventory.   The change resulted in a cumulative decrease in income of $35,000 with a tax rate of 40%.   Lee Corporation also declared dividends of $100,000 to be paid in early 2008.   Income before taxes for 2007 was $240,000 with an effective tax rate of 40%, making net income for 2007 $144,000.   The following journal entries are needed to record these transactions and calculate other comprehensive income.

Retained Earnings 15,000
Deferred Taxes 10,000
Accumulated Depreciation 25,000
To record the change in depreciation, net of the tax rate.

Retained Earnings 21,000
Deferred Taxes 14,000
Inventory 35,000
To record the change in inventory valuation method, net of the tax rate for 2007.

Retained Earnings 100,000
Dividends payable 100,000
To record cash dividends declared in 2007, to be paid Jan 15, 2008.

Lee acquired a Canadian subsidiary for CA $100,000 which is the value of the sole asset of land that the subsidiary owned.   The exchange rates obtained from www.x-rates.com for the years 2004 – 2007 are stated below.

Amount in Amount in
Year Canadian $ U.S. $ Factor
2004 100,000 83,065.50 .830655
2005 100,000 86,136.40 .861364
2006 100,000 85,888.50 .858885
2007 100,000 101239.50 1.012395

Journal entries for the foreign exchange adjustments for years 2005 – 2007 are as follows.

Investment in Subsidiary 3070.90
Cumulative translation Adjustment 3070.90
To record exchange adjustment for 2005 (86,136.40 – 83,065.50)

Cumulative translation Adjustment 247.90
Investment in Subsidiary 247.90
To record exchange adjustment for 2006 (85,888.50 - 86,136.40)

Investment in Subsidiary 15351.00
Cumulative translation Adjustment 15351.00
To record...

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