A combined single-step income and statement of retained earnings for California Tanning Salon Corp. follows for 2014 (amounts in thousands):

Additional facts are as follows:
1. Selling, general, and administrative expenses for 2014 included a usual but infrequently occurring charge of$10.5 million for a loss on inventory due to decline in NRV.
2. Other, net for 2014 included the results of an identified component of the business that management had determined would be eliminated from the future operations of the business ($9 million). If the decision had not been made to discontinue the operation, income tax for 2014 would have been S22.4 million instead of$19.4 million.
T he component has one asset, a piece of equipment with a carrying value of $3.2 million, which is included on the company's balance sheet under property, plant, and equipment.
3. "Adjustment required for correction of an error" resulted from a change in estimate as the useful life of certain assets was reduced to eight years and a catch-up adjustment was made.
4. The company disclosed earnings per common share for net income in the notes to the financial statements. The company has elected to adopt ASPE.
Instructions
(a) Discuss the appropriate presentation of the facts in the California Tanning Salon Corp. income statement and statement of retained earnings, and discuss the theory that supports the presentation.
(b) Prepare a revised combined statement of income and retained earnings for California Tanning Salon Corp.

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Net sales revenue $640,000 Operating expenses Cost of goods sold Selling, general, and administrative expenses Other, net 500,000 66,000 17,000 583,000 57,000 19,400 37,600 Income before income tax Income tax Net income Retained earnings at beginning of period, as previously reported Adjustment required for correction of error Retained earnings at beginning of period, as restated Dividends on common shares Retained earnings at end of period 141,000 (7,000) 134,000 (12.200) $159,400