Problem 1 Thompson Corporation prepared the following income statement and statement of retained earnings for the year ended December 31, 2020. Sales (net) $ 196,000 Less: Selling Expenses (19,600) Net sales $ 176,400 Add: Interest Revenue 2,300 Add: Gain on sale of equipment 3,200 Gross Sales Revenue $ 181,900 Less: Cost of operations: Cost of goods sold $ 120,100 Correction of overstatement in last years income because of error, $5,500 (net of tax credit) 3,850 Dividend costs ($.50 per share for 8,000 common shares) 4,000 Unusual loss due to an earthquake, $6,000 (net of tax credit) 4,200 (132,150) Taxable Revenues 49,750 Less: Income tax on income from continuing operations 12,480 Net Income 37,270 Miscellaneous Deductions Loss from operations of discontinued Division L, $3,000 (net of tax credit) 2,100 Administrative expenses 16,800 (18,900) Net Revenues $ 18,370 Beginning retained earnings $ 59,300 Add: Gain on sale of Division, $4,500 (net of taxes) 3,150 Recalculated retained earnings $ 62,450 Add: Net Revenues 18,370 $ 80,820 Less: Interest Expense (3,400) Ending retained earnings $ 77,420 For Year Ended December 31, 2020 Thompson Corporation December 31, 2020 Expense and Profit Statement Thompson Corporation Retained Revenues Statement The preceding account balances are correct but have been incorrectly classified in certain instances. Assume an income tax rate of 30 for all items. Some items Instructions: Prepare a corrected 2020 multiple-step income statement and a 2020 retained earnings statement and in good form. Before preparing the 2020 retained earnings statement, determine the correct balance as of the beginning of the year.