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Misclassifications

Rox Corporation's multiple-step income statement and retained earnings statement for the year ended December 31, 2019, as developed by its bookkeeper, are shown here:

Revenue Statement December 31, 2019
Sales (net)			$179,000
Plus: Income from operations of discontinued Division P (net of $960 income taxes)			2,240
Less: Dividends declared ($1.50 per common share)			(7,500)
Net revenues			$173,740
Less: Selling expenses			(19,000)
Gross profit			$154,740
Less Operating expenses:
Interest expense	$4,100
Loss on sale of Division P (net of $1,200 income tax credit)	2,800
Cost of goods sold	110,700
Income tax expense on income from continuing operations	5,370		(122,970)
Total operating expenses			$31,770
Operating income
Miscellaneous items:
Dividend revenue	$1,800
General and administrative expenses	(24,300)		(22,500)
Income before unusual items			$9,270
Unusual items:
Loss on sale of land	$(4,800)
Correction of error in last year's income (net of $1,500 income taxes)	3,500		(1,300)
Net income			$7,970

Retained Earnings Statement December 31, 2019
Beginning retained earnings	$62,850
Add: Net income	7,970
Adjusted retained earnings	$70,820
Less: Loss from theft (net of $2,760 income tax credit)	(6,440)
Ending retained earnings	$64,380

You determine that the account balances listed on the statements are correct but are incorrectly classified in certain cases. The company faces a 30% tax rate. No shares of common stock were issued or retired during 2019.

Required:

2. Prepare a correct multiple-step income statement for 2019. Round earnings per share computations to two decimal places.

179,000 110,700 68,300 - 19,000 -24,300 -43,300 25,000 1,800 -4,800 ROX CORPORATION Income Statement (Multi-Step) For Year Ended December 31, 2019 Sales (net) Cost of goods sold Gross profit Operating expenses Selling expenses General and administrative expenses Total operating expenses Operating income Other items Dividend revenue Loss on sale of land Loss from theft Interest expense Gross profit X Income tax expense Income from continuing operations Results from discontinued operations Income from operations of discontinued Division P (net of income taxes) Loss on sale of Division P (net of income tax credit) ~ Net income Components of Income Income from continuing operations Results from discontinued operations Net income -6,440 X 5,370 x 12,530 X 2,240 -2,800 -560 11,970 X EPS 9,030 X -560 X 7,970 X 3. Prepare a statement of retained earnings for the year ended December 31, 2019. ROX CORPORATION Statement of Retained Earnings For Year Ended December 31, 2019 Retained earnings, 1/1/2019 Add: Prior period adjustment, correction of error in last year's income (net of income taxes) Adjusted retained earnings, 1/1/2019 Add: Net income S 62,850 6,440 S 70,820 X 7,970 X 71,880 > > -7,500 Less: Dividends dedared Retained earnings, 12/31/2019 64,380

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