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:

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:
1. Review both statements and indicate where each incorrectly classified item should be classified.
2. Prepare a correct multiple-step income statement for 2019.
3. Determine the correct beginning balance in retained earnings, and then prepare a correct 2019 retained earnings statement.

Transcribed Image Text:

Revenue Statement December 31, 2019 Sales (net) Plus: Income from operations of discontinued Division P (net of $960 income taxes) Less: Dividends declared ($1.50 per common share) $ 179,000 2,240 (7,500) $ 173,740 (19,000) $ 154,740 Net revenues Less: Selling expenses Gross profit Less: Operating expenses: Interest expense Loss on sale of Division P (net of $1,200 income tax credit) Cost of goods sold Income tax expense on income from continuing operations Total operating expenses Operating income Miscellaneous items: Dividend revenue General and administrative expenses $ 4,100 2,800 110,700 5,370 (122,970) $ 31,770 $ 1,800 (24,300) (22,500) $ 9,270 Income before unusual items Unusual items: Loss on sale of land Correction of error in last year's income (net of $1,500 income taxes) $ (4,800) 3,500 (1,300) $4 7,970 Net income Retained Earnings Statement December 31, 2019 Beginning retained earnings Add: Net income Adjusted retained earnings Less: Loss from theft (net of $2,760 income tax credit) Ending retained earnings $62,850 7,970 $70,820 (6,440) $64,380