1) Precision Corporation had the following income statement prepared by a new accounting intern for the fiscal year ended December 31, 2020. The management of Precision is concerned that it was not prepared in accordance with generally accepted accounting principles. Precision is a private corporation reporting under ASPE.

Precision Corporation

Income Statement

December 31, 2020

Sales $1,500,000

Interest Revenue 45,000

Issue of Common Shares for Cash 155,000

Total Revenues $1,700,000

Less:

Cost of Goods Sold $825,000

Operating Expenses 340,000

Cash Dividends Declared on Common Shares 120,000

Total Expenses 1,285,000

Net Gain $ 415,000

Additional Information:

1. The balance of Retained Earnings was $472,000 on January 1^st, 2020.

2. Precision had a profit from discontinued operations of $70,000 and a loss on the disposal of assets of the discontinued operations of $40,000 during 2020.

3. It was discovered that sales had been overstated by $100,000 in 2019.

4. The corporate income tax rate is 50%.

Instructions:

1. Prepare a revised, corrected income statement for the year ended December 31, 2020.

2. Prepare a statement of retained earnings for the year ended December 31, 2020.