B Problems 3 P4.5B (LO 2,3,4,5) (Irregular Items) Presented below is a combined single-step income and retained earnings statement for OFD Company for 2020. Net sales $960,000 Costs and expenses Cost of goods sold $600,000 Selling, general, and administrative expenses 121,000 Other, not 12,000 733,000 Income before income tax 127,000 Income tax 42,400 Net income 84,600 Retained earnings at beginning of period, as previously reported 210,000 Adjustment required for correction of error 21,000 Retained earnings at beginning of period, as restated 231,000 Dividends on common stock (52,500) Retained earnings at end of period $263,100 Additional facts are as follows: 1. "Selling, general, and administrative expenses" for 2020 included a charge of $11,000,000 that was usual but infrequently occurring. 2. "Other, net" for 2020 included an unusual gain of $8,500,000. If the unusual gain had not occurred, income taxes for 2020 would have been $40,200,000 instead of $42,400,000. 3. "Adjustment required for correction of an error" was a result of a change in estimate (useful life of certain assets reduced to 8 years and a catch-up adjustment made). 4. OFD Company disclosed earnings per common share for niet incune in the notes to the financial statements. Instructions Determine from these additional facts whether the presentation of the facts in the OFD Company income and retained earnings statement is appropriate. If the presentation is not appropriate, describe the appropriate presentation and discuss its theoretical rationale. (Do not prepare a revised statement.) B Problems 3 P4.5B (LO 2,3,4,5) (Irregular Items) Presented below is a combined single-step income and retained earnings statement for OFD Company for 2020. Net sales $960,000 Costs and expenses Cost of goods sold $600,000 Selling, general, and administrative expenses 121,000 Other, not 12,000 733,000 Income before income tax 127,000 Income tax 42,400 Net income 84,600 Retained earnings at beginning of period, as previously reported 210,000 Adjustment required for correction of error 21,000 Retained earnings at beginning of period, as restated 231,000 Dividends on common stock (52,500) Retained earnings at end of period $263,100 Additional facts are as follows: 1. "Selling, general, and administrative expenses" for 2020 included a charge of $11,000,000 that was usual but infrequently occurring. 2. "Other, net" for 2020 included an unusual gain of $8,500,000. If the unusual gain had not occurred, income taxes for 2020 would have been $40,200,000 instead of $42,400,000. 3. "Adjustment required for correction of an error" was a result of a change in estimate (useful life of certain assets reduced to 8 years and a catch-up adjustment made). 4. OFD Company disclosed earnings per common share for niet incune in the notes to the financial statements. Instructions Determine from these additional facts whether the presentation of the facts in the OFD Company income and retained earnings statement is appropriate. If the presentation is not appropriate, describe the appropriate presentation and discuss its theoretical rationale. (Do not prepare a revised statement.)