Selected data of Ace Company for the year ended December 31, 1998, are:

Assume the applicable federal income tax rate is \(40 \%\). All of the preceding items of expense, revenue, and loss are included in the computation of taxable income. The litigation loss resulted from a court award of damages for patent infringement on a product that the company produced and sold in 1994 and 1995, but was discontinued in 1995. In addition, the company discovered that in 1997 it had erroneously charged to expense the \(\$ 250,000\) cost of a tract of land purchased that year and had made the same error on its tax return for 1997. Retained earnings as of January 1,1998, were \(\$ 5,600,000\). Assume there were 10,000 shares of common stock and 5,000 shares of preferred stock outstanding for the entire year.
Prepare an income statement and a statement of retained earnings for 1998

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Sales, net. Interest expense Cash dividends on common stock Selling and administrative expenses Cash dividends on preferred stock Rent revenue Cost of goods sold. Flood loss (has never occurred before) Interest revenue Other revenue. Depreciation and maintenance on rental equipment. Stock dividend on common stock Operating income on Plastics Division up to point of sale in 1998 Gain on disposal of Plastics Division Litigation loss (has never occurred before) Cumulative positive effect on prior years' income of changing to a different depreciation method. $1,000,000 90,000 150,000 245,000 70,000 400,000 650,000 200,000 90,000 150,000 270,000 300,000 50,000 25,000 400,000 80,000