The pre-audit income statement of Jericho Recreation Incorporated was prepared by a newly hired staff accountant for the year ending December 31. 2002.

The following information was obtained by Jericho s independent auditor

(a) Net revenues in the income statement included the following items.

(b) Jericho changed its method of inventory- costing in 2002. The staff accountant correctly determined that the cumulative effect of the change, before any tax considerations, was a reduction in current-year income of S 18,000. In preparing the income statement, the accountant added the \($18,000\) to cost of goods sold.

(c) Of the total depreciation expense reported in the income statement. 60"o relates to stores and store equipment, 40% to office building and equipment.

(d) At the beginning of 2002. management decided to close one of Jericho s retail stores. The inventory and equipment were moved to another Jericho store, and the land and building were sold on July 1, 2002, at a pretax gain of \($40,000.\) This amount has been reported under discontinued operations.
(e) The income tax rate is 30%.
Instructions:
Prepare a corrected multiple-step income statement for the year ended December 31, 2002.

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Net revenues Cost of goods sold Gross profit. Expenses: Sales salaries and commissions $797,000 320,800 $476,200 $160,000 Officers' and office salaries.... 210,000 Depreciation.... 56,000 Advertising expense. 13,400 Other general and administrative expenses 38,800 Net loss from continuing operations. Discontinued operations: Gain on disposal of business segment Income before income taxes Income taxes (30%). Net income. Earnings per common share (10,000 shares outstanding) 478,200 $ (2,000) 40,000 $ 38,000 11,400 $ 26,600 $ 2.66