Rocket Man, Incorporated provided the following financial statement information for 2022:

• On January 1, 2022, Rocket Man changed its plant and equipment accounting for depreciation from the double-declining balance method to the straight-line method. Rocket Man purchased the assets on January 1, 2021 for $600,000; they had no scrap value and useful lives of 10 years. The balance in the accumulated depreciation account at January 1, 2022 amounted to $120,000. Rocket Man recorded the straight-line depreciation expense of $53,333 in 2022 and included it in the $480,000 reported for selling and administrative expenses. Depreciation expense would have been $96,000 if Rocket Man still used the double-declining balance method.

• Bad debt expense for 2022 of $50,000 is included in selling, general, and administrative expenses on the income statement. Rocket Man uses the percentage of accounts receivable method of estimating bad debt expense. The estimated percentage was 5% in both 2020 and 2021 but changed to 10% in 2022. At December 31, 2022, the Accounts Receivable balance is $600,000, and the Allowance for Uncollectible Accounts (before adjustment) was $10,000 credit balance.

Required

a. Assuming a tax rate of 40%, prepare the multiple-step income statement for Rocket Man for the year ended December 31, 2022.

b. Compute the cumulative effect of the accounting changes made in 2022.

c. Prepare the journal entries to record the accounting changes made in 2022.

d. Prepare the footnote disclosures required for the accounting changes made in 2022.

e. Prepare the retained earnings column of the statement of stockholders’ equity for the year ended December 31, 2022.

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Credit sales Retained earnings, January 1, 2022 Sales Selling and administrative expenses Restructuring gain (pretax) Cash dividends declared Cost of goods sold Error correction: 2017 rent was unpaid and unrecorded Interest income Interest expense Gain on sale of investments (pre-tax) $2,500,000 1,600,000 3,000,000 480,000 720,000 190,000 1,755,000 40,000 480,000 820,000 500,000