Adjusting Balance Sheet and Income Statement for Asset Disposal On its 2019 income statement, American Airlines reported a gain of $128 million on sale of property and equipment that the company had used for the prior five years. For an accurate year by year assessment, we want to adjust American Airlines financial statements for each of the past five years (including the current year). Assume that the companys tax rate is 22%. a. For the income statement effects related to the gain on asset disposal, identify with numbers the adjustments for each of the five years 2015 to 2019 for the following line items. Note: Use a negative sign to indicate if an adjustment decreases an account balance. Note: Round answers to two decimals (for example, enter 14.56 for 14.55555).

Income Statement Adjustments ($ millions)	2015	2016	2017	2018	2019
Current Year Gain Adjustments:
Gain on disposal (reversal)					Answer
Tax expense (reversal)					Answer
Net income (reversal)					Answer
Allocation of Gain Adjustments:
Depreciation expense	Answer	Answer	Answer	Answer	Answer
Tax expense	Answer	Answer	Answer	Answer	Answer
Net income (allocation)	Answer	Answer	Answer	Answer	Answer
Total net income (reversal + allocation)	Answer	Answer	Answer	Answer	Answer

b. For the balance sheet effects related to the gain on asset disposal, identify with numbers the adjustments for each of the five years 2015 to 2019 for the following line items. Note: Use a negative sign to indicate if an adjustment decreases an account balance. Note: Round answers to two decimals (for example, enter 14.56 for 14.55555).

Balance Sheet Adjustments ($ millions)	2015	2016	2017	2018	2019
Accumulated depreciation	Answer	Answer	Answer	Answer	Answer
Deferred tax liability	Answer	Answer	Answer	Answer	Answer
Retained Earnings	Answer	Answer	Answer	Answer	Answer

c. What purpose is there to adjusting the income statement and balance sheet in this specific case? AnswerTo adjust for overstated depreciation expense across yearsTo adjust for understated depreciation expense across years