P4-9 A combined single-step income statement and statement of retained earnings for California Tanning Salon Corp. follows for 2020 (amounts in thousands): Net sales revenue $640,000 Operating expenses Cost of goods sold 500,000 Selling, general, and administrative expenses 66,000 Other, net 17,000 583,000 Income before income tax 57,000 Income tax expense 19,400 Net income 37,600 Retained earnings at beginning of period, as previously reported 141,000 Adjustment required for correction of error (7,000) Retained earnings at beginning of period, as restated 134,000 Dividends on common shares (12,200 Retained earnings at end of period $159,400 Additional facts are as follows: 1. Selling, general, and administrative expenses for 2020 included a usual but infrequently occurring charge of S10.5 million for a loss on inventory due to a decline in net realizable value. 2. "Other, net" for 2020 included the results of an identified component of the business that management had determined would be eliminated from the future operations of the business ($9 million). If the decision had not been made to discontinue the operation, income tax for 2020 would have been $22.4 million instead of $19.4 million. The component has one asset, a piece of equipment with a carrying value of $3.2 million, which is included on the company's statement of financial position under property, plant, and equipment (and is equal to the fair value). 3. "Adjustment required for correction of an error" resulted from a change in estimate as the useful life of certain assets was reduced to eight years and a catch-up adjustment was made. 4. The company disclosed earnings per common share for net income in the notes to the financial statements. The company has elected to adopt ASPE Instructions a. Discuss the appropriate presentation of the facts in the California Tanning Salon Corp. income statement and statement of retained earnings and discuss the theory that supports the presentation. b. Prepare a revised combined statement of income and retained earnings for California Tanning Salon Corp