Pocket Woman, Incorporated provided the following financial statement information for 2021:

Credit sales	2,700,000
Retained earnings, January 1, 2021	1,400,000
Cash sales	500,000
Selling and administrative expenses	920,000
Restructuring gain (pretax)	700,000
Cash dividends declared	120,000
Cost of goods sold	1,785,000
Error correction: 2016 rent was unpaid and unrecorded	30,000
Interest income	380,000
Interest expense	620,000
Gain on sale of investments (pre-tax)	200,000

On January 1, 2021, Pocket Woman changed its plant and equipment accounting for depreciation from the double-declining balance method to the straight-line method. Pocket Woman purchased the assets on January 1, 2020 for $600,000; they had no scrap value and useful lives of 10 years. The balance in the accumulated depreciation account at January 1, 2021 amounted to $120,000. Pocket Woman recorded the straight-line depreciation expense in 2021 and included it in the $920,000 reported for selling and administrative expenses. Depreciation expense would have been $96,000 for 2021 if Pocket Woman had still used the double-declining balance method.

Bad debt expense for 2021 of $54,000 is included in selling and administrative expenses on the income statement. Pocket Woman uses the percentage of accounts receivable method of estimating bad debt expense. The estimated percentage was 7% in both 2019 and 2020 but changed to 10% in 2021. At December 31, 2021, the Accounts Receivable balance is $600,000, and the Allowance for Uncollectible Accounts (before adjustment) was $6,000 credit balance.

Required:

A. Assuming a tax rate of 35%, prepare the multiple-step income statement for Pocket Woman for the year ended December 31, 2021.

B. Prepare the journal entries to record the accounting changes and corrections made in 2021.

C. Prepare the retained earnings section of the statement of stockholders equity for the year ended December 31, 2021.

A Pocket Woman, Inc. Income Statement For the Year Ended Dec. 31, 2021 Sales Cost of goods sold Gross profit Selling and administrative expenses Operating income Other Revenues/Gains: Gain on restructuring (pretax) Gain on sale of investments (pretax) Interest income Total other revenues/Gains Other Expenses/Losses: Interest expense Earnings before tax Income tax Net income B General Journal Accounts Debit Credit Date Dec. 31, 2021 Dec 31, 2021 Dec. 31, 2021 Pocket Woman, Inc. Equity Section of Balance Sheet For the Year Ended Dec. 31, 2021 Retained earnings, Jan. 1, 2021 as previously reported Prior period adjustment: Correction of an error Retained earnings, Jan. 1, 2021 as restated Net income Less: Dividends declared Retained earnings, Dec. 31, 2021