Selected preadjustment account balances and adjusting information of Sunset Cosmetics Inc. for the year ended December 31, 2002, are as follows:

Instructions:
Prepare a corrected multiple-step income statement and a retained earnings statement for the year ended December 31. 2002. Assume aU amounts are material.

Transcribed Image Text:

Retained Earnings, January 1, 2002 Sales Salaries and Commissions Advertising Expense Legal Services $440,670 35,000 16,090 2,225 Insurance and Licenses 8,500 Travel Expense-Sales Representatives 4,560 Depreciation Expense-Sales/Delivery Equipment 6,100 Depreciation Expense-Office Equipment 4,800 Interest Revenue 700 Utilities Expense 6,400 Telephone and Postage Expense 1,475 Supplies Inventory 2,180 Miscellaneous Selling Expenses 2,200 Dividends. 33,000 Dividend Revenue 7,150 Interest Expense 4,520 Allowance for Doubtful Accounts (Cr. balance) 370 Officers' Salaries Expense 36,600 Sales 495,200 Sales Returns and Allowances 11,200 Sales Discounts Gain on Sale of Assets 880 18,500 Inventory, January 1, 2002 89,700 Inventory, December 31, 2002 20,550 Purchases 173,000 Freight-In 5,525 Accounts Receivable, December 31, 2002 261,000 Gain from Discontinued Operations (before income taxes) 40,000 Extraordinary Loss (before income taxes) 72,600 Shares of Common Stock Outstanding 39,000