Rockwell Wholesalers, Inc. has just completed its fourth year of business in 20X1. A set of financial statements was prepared by the principal stockholder’s eldest child, a college student who is beginning the third week of an accounting course. Following is a list (in no systematic order) of the items appearing in the student’s balance sheet, income statement, and the retained earnings column of the statement of stockholders’ equity:

Assume that the statements in which these items appear are current and complete, except for the following matters not taken into consideration by the student:

a. Salaries of $8,500 have been earned by employees for the last half of December 20X1. Payment by the company will be made on the next payday, January 2, 20X2.

b. Interest at 6% per annum on the Note Receivable has accrued for 2 months and is expected to be collected by the company when the Note is due on January 31, 20X2.

c. Part of the building owned by the company was rented to a tenant on November 1, 20X1, for 6 months, payable in advance. This rent was collected in cash and is represented by the item labeled Unearned Rent Revenue.

d. Depreciation on the building for 20X1 is $6,250.

e. Cash dividends of $60,000 were declared in December 20X1, payable in January 20X2.

f. Income tax at 40% applies to 20X1, all of which is to be paid in the early part of 20X2.

Required

Prepare the following corrected financial statements, showing appropriate support for the dollar amounts you compute:

1. Multiple-step income statement for the year ended December 31, 20X1

2. The retained earnings column of the statement of stockholders’ equity for the year ended December 31, 20X1

3. Classified balance sheet at December 31, 20X1

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$183,100 Advertising expense Accounts receivable Note receivable Merchandise inventony Cash Paid-in capital Building Accumulated depreciation, 97,300 590,000 4,800 3,500 2,300 52,500 500 20,000 2,500 58,626 3,400 4,800 36,000 201,900 Cost of goods sold Unearned rent revenue 99,300 Insurance expense 620,000 Unexpired insurance 300,000 Accounts payable Interest expense building Land Sales Salary expense Retained earnings 20,000 Telephone expense 169,200 Notes payable 936,800 Net income 124,300 Miscellaneous expense 164,000 Maintenance expense December 31, 20xo