Individual Assignment: Lee Corporation Equity Scenario  Review the following information: o Lee Corporation, a U.S. company, began operations on January 1, 2004. o 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 | o 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%

Lee Corporation | Retained Earnings Statement | For the Year Ended December 31, 2007 | Balance, January 1, as reported | $225,000* | | Correction for depreciation error (net of $10,000 tax) | (15,000) | | Cumulative decrease in income from change in inventory methods (net of $14,000 tax) | (21,000) | | Balance, January 1, as adjusted | 189,000 | | Add: Net income | 144,000** | | | 333,000 | | Less: Dividends declared | 100,000 | | Balance, December 31 | $233,000 | | *($40,000 + $125,000 + $160,000) – ($50,000 + $50,000)
**[$240,000 – (40% X $240,000)] Common stock | $500 | Treasury stock | (-$200) | Additional paid-in principle | $1000 | Shares outstanding | 375,940 | Shares authorized | 500,000 | Shares in treasury | 30,000 | o 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 www.x-rates.com and use the historic lookup feature to determine exchange rates on 12/31/04, 12/31/05, and 12/31/06. Deliverables for this assignment:

1. A short schedule that shows income before taxes, taxes, and net income for 2007.

2. Journals entries needed to determine comprehensive income for 2007. You are creating the entries that support the adjustment amounts and dividends in the Statement of Retained Earnings that is provided.

3. With the information given in the problem, present a Statement of Changes in Owner’s Equity using the format from the text.

4. A chart that shows the currency conversion for each year 2004 through 2007. You will need columns for the US Amount, the adjustment amount, and the factor.