Looking for the answer for situation 2, I included situation 1 incase it is needed.

A combined statement of income and retained earnings for Whispering Winds Ltd. for the year ended December 31, 2020, follows. (As a private company, Whispering Winds 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 Whispering Winds Ltd. Whispering Winds Ltd. Combined Statement of Income and Retained Earnings For the Year Ended December 31, 2020 Sales revenue $ 5,740,000 Cost of goods sold 2,920,000 Gross profit 2,820,000 Selling, general, and administrative expenses 1,870,000 Income before income tax 950,000 Income tax expense 237,500 Income before unusual item 712,500 Loss from tornado (net of taxes) 427,500 Net income 285,000 Retained earnings, January 1 961,875 Retained earnings, December 31 $ 1,246,875 For each of the three unrelated situations, prepare a revised combined statement of income and retained earnings for Whispering Winds Ltd. The company has a 25% 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 $610,000. 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 $1.31 million; cost of goods sold of $655,000; and selling, general, and administrative expenses of $497,800. (Round answers to 0 decimal places, e.g. 5,275.) 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 1.2% of total sales revenue, and owing to an increase in the write off of uncollectible accounts, the rate was raised to 3.0% of total sales revenue. The amount recorded in Bad Debt Expense under the heading Selling, General, and Administrative Expenses for 2020 was $68,880 and for 2019 it was $77,000. (Round answers to 0 decimal places, e.g. 5,275.)