P$3\mathrm{.}5($LO $1,3)($Unusual or Infrequent Items$)$ Presented below is a combined single$-$step income

and retained earnings statement for Nerwin Company for $2025.$

Additional facts are as follows.

"Selling, general, and administrative expenses" for $2025$ included a charge of $$8,500,000$ that was

usual but infrequently occurring.

"Other, net" for $2025$ included a loss on sale of equipment of $$6,000,000.$

"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$).$

Nerwin Company disclosed earnings per common share for net income in the notes to the financial

statements.

Instructions

Determine from these additional facts whether the presentation of the facts in the Nerwin 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.$)$

P$3\mathrm{.}6($LO $1,2,3)($Retained Earnings Statement, Prior Period Adjustment$)$ Below is the Retained

Earnings account for the year $2025$ for Acadian Corp.

Retained earnings, January $1,2025$

$$257,600$

Add:

Gain on sale of investments $($net of tax$)$

$$41,200$

Net income $84,500$

Refund on litigation with government, related to the year $202221,600$

$($net of tax$)$

Recognition of income earned in $2024,$ but omitted from income

statement in that year $($net of tax$)$

Deduct:

Loss on discontinued operations $($net of tax$)$

Write$-$off of goodwill $($net of tax$)$

Cumulative effect on income of prior years in changing from LIFO to

FIFO inventory valuation in $2025($net of tax$)$

Cash dividends declared

$25,{400}_{,}\frac{172,700}{430,300}$

Retained earnings, December $31,2025$

$35,000$

$60,000$

$23,200$

$32,000,150,{200}_{?}$

$$280,100$

Instructions

a$.$ Prepare a corrected retained earnings statement. Acadian Corp. normally sells investments of the

type mentioned above. FIFO inventory was used in $2025$ to compute net income.

b$.$ State where the items that do not appear in the corrected retained earnings statement should be

shown.