A combined statement of income and retained earnings for Sarasota Ltd. for the year ended December 31, 2020, follows. (As a private company, Sarasota has elected to follow ASPE.) Also presented are three unrelated situations involving accounting changes and the classification of certain items as ordinary or unusual. Each situation is based on the combined statement of income and retained earnings of Sarasota Ltd. Sarasota Ltd. Combined Statement of Income and Retained Earnings For the Year Ended December 31, 2020 Sales revenue $ 5,670,000 Cost of goods sold 2,870,000 Gross profit 2,800,000 Selling, general, and administrative expenses 1,870,000 Income before income tax 930,000 Income tax expense 279.000 Income before unusual item 651,000 Loss from tornado (net of taxes) 423,150 Net income 227,850 Retained earnings, January 1 846,300 Retained earnings, December 31 $ 1,074,150 For each of the three unrelated situations, prepare a revised combined statement of income and retained earnings for Sarasota Ltd. The company has a 30% income tax rate. Situation 1. In late 2020, the company discontinued its apparel fabric division. The loss on the disposal of this discontinued division amounted to $580,000. This amount was included as part of selling, general, and administrative expenses. Before its disposal, the division reported the following for 2020: sales revenue of $1.35 million; cost of goods sold of $675,000; and selling, general, and administrative expenses of $519,750. (Round answers to decimal places, e.g. 5,275.) Sarasota Ltd. Combined Statement of Income and Retained Earnings For the Year Ended December 31, 2020 Sales Revenue $ 4320000 Cost of Goods Sold 2195000 Gross Profit/(Loss) 2125000 Selling, General and Administrative Expenses 1350250 Income from Operations 774750 Other Expenses and Losses Loss from Tornado 564200 Income before Income Tax and Discontinued Operations 210550 52638 Income Tax Expense Income before Discontinued Operations 157912 Discontinued Operations Income from Operations Of Apparel Division (Net Of Tax) $ 108675 Loss from Disposal Of Apparel Division (Net Of Tax) 1969687 2078362 Net Income /(Loss) $ > 1920450 Retained Earnings, January 1 > 846300 Retained Earnings, December 31 > $ 1074150 Situation 2. At the end of 2020, the company's management decided that the estimated loss rate on uncollectible accounts receivable was too low. The loss rate used for the years 2019 and 2020 was 1.1% of total sales revenue, and owing to an increase in the write off of uncollectible accounts, the rate was raised to 2.0% of total sales revenue. The amount recorded in Bad Debt Expense under the heading Selling, General, and Administrative Expenses for 2020 was $62,370 and for 2019 it was $73,000. (Round answers to decimal places, e.g. 5,275.) Sarasota Ltd. Combined Statement of Income and Retained Earnings $ $ > $ $ $ $ Situation 3. On January 1, 2018, the company acquired machinery at a cost of $470,000. The company adopted the declining- balance method of depreciation at a rate of 30% for this machinery, and had been recording depreciation over an estimated life of 10 years, with no residual value. At the beginning of 2020, a decision was made to adopt the straight-line method of depreciation for this machinery to better match expenses to their related revenues. Depreciation for 2020, based on the straight-line method, was included in selling, general, and administrative expenses. (Hint: a change in depreciation method is considered a change in estimate, not a change in accounting policy.) (Round answers to decimal places, e.g. 5,275.) Sarasota Ltd. Combined Statement of Income and Retained Earnings $