On the income statement for the year ending December 31, Y1, the accountant for ABC calculated operating income before taxes of $300,000. This $300,000 did not include the effect of any of the following:

1. ABC had interest expense of $12,000.

1. On September 1, Y1, ABC decided to sell the assets and product line of one of its components. During Y1, the pretax income from the segment was $60,000 spread evenly throughout the year. The sale of the division will be finalized on February 1, Y2. The book value of the component was $800,000 and the fair value less cost to sell is $700,000 on December 31, Y1.

1. ABC sold a building that had a book value of $120,000 for $150,000 during Y1.

1. During Y1, ABC discovered that land that the company had bought for speculative purposes for $15,000 in 2003 had been incorrectly expensed during 2003.

1. ABC decided to change its depreciation method for trucks in the year from straight-line to double-declining balance.ABC calculated the $300,000 above using straight-line depreciation expense. The cost of trucks, all which were purchased on 1/1/Y0 was $200,000. ABC estimated at that time the salvage value to be $20,000 and the useful life of the trucks to be 9 years.

1. The income tax rate for ABC was 40% during all years. There were $25,000 of dividends declared and paid on the common stock during Y1.Retained earnings had a balance of $1,000,000 on January 1, Y1 and only one year is presented on the face of the financial statements.

These items were not corrected in the income statement. What would the effect of these errors be on net income?

Create a statement of retained earnings. ABC only presents one year on their financial statements.