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Lee Corporation: Statement of changes in owner's equity and notes

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Please see the attachment.

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%

Prepare a statement of changes in owner's equity and accompanying notes appropriate to the section.

Note: Record the necessary journal entries before attempting to calculate other comprehensive income.

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The solution examines the statement of changes in owner's equity for Lee Corporation.

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