Jeremy Hawk, accountant for Rainbow International Corp., was injured in an auto accident. Another employee prepared the following income statement for the year ended December 31, 2007:

The individual amounts listed on the income statement are correct. However, some accounts are reported incorrectly; and two items don't belong on the income statement at all. Also, income tax has not been applied to all appropriate figures. The income tax rate on discontinued operations is \(40 \%\). Rainbow issued 14,000 shares of common stock in 2004 and held 4,000 shares as treasury stock during fiscal year 2007. Retained earnings at June 30,2006 , was \(\$ 117,000\).

Requirements 

Prepare a corrected combined statement of income and retained earnings for the fiscal year ended December 31, 2007. Prepare the income statement in single-step format, and include earnings per share. 

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RAINBOW INTERNATIONAL CORP. Income Statement December 31, 2007 Revenue and gains: Sales $733,000 Paid-in capital in excess of par-common 111.000 Total revenues and gains Expenses and losses: Cost of goods sold Selling expenses 844,000 $383,000 103,000 General expenses 91,000 Sales returns 22,000 Sales discounts 10,000 Dividends 15,000 Income tax expense 32,000 Total expenses and losses 656,000 Income from operations 188,000 Other gains and losses: Loss on discontinued operations Net income Earnings per share (15,000) $173.000 $ 17.30