Problem 4-51. Corrected Income and Retained Earnings Statements Selected pre-adjustment account balances and adjusting information of Sunset Cosmetics Inc. for the year ended December 31, 2015, are as follows:

Retained Earnings, January 1, 2015 $440,670 Interest Expense $ 4520 Sales Salaries and Commissions 35,000 Allowance for Bad Debts (Cr. balance) 370 Advertising Expense 16,090 Officers' Salaries Expense 36,600 Legal Services 2,225 Sales 495,200 Insurance and Licenses 8,500 Sales Returns and Allowances 11,200 Travel Expense-Sales Representatives 4,560 Sales Discounts 880 Depreciation Expense-Sales/Delivery Gain on Sale of Assets 18,500 Equipment 6,100 Inventory, January 1, 2015 89,700 Depreciation Expense-Office Equipment 4,800 Inventory, December 31, 2015 20,550 Interest Revenue 700 Purchases 173,000 Utilities Expense 6,400 Freight-In 5,525 Telephone and Postage Expense 1,475 Accounts Receivable, December 31, 2015 261,000 Supplies Inventory 2,180 Gain from Discontinued Operations Miscellaneous Selling Expenses 2,200 (before income taxes) 40,000 Dividends 33,000 Extraordinary Loss (before income taxes) 72,600 Dividend Revenue 7,150(a) Cost of inventory in the possession of consignees as of December 31, 2015, was not included in the ending inventory balance..... -........" $33,600 (b) After preparing an analysis of aged accounts receivable, a decision was made to increase the allowance for bad debts to a percentage of the ending accounts receivable balance. ...... ...... 396 (c) Purchase returns and allowances were unrecorded. They are computed as a percentage of purchases (not including freight-in)... 6% (d) Sales commissions for the last day of the year had not been accrued. Total sales for the day .... . . . . ... $3,600 Average sales commissions as a percent of sales. ... 396 (e) No accrual had been made for a freight bill received on January 3, 2016, for goods received on December 29, 2015..... . . . .. $800 (f) An advertising campaign was initiated November 1, 2015. This amount was recorded as prepaid advertising and should be amortized over a 6-month period. No amortization was recorded. .. .....: $1,818 (g) Freight charges paid on sold merchandise and not passed on to the buyer were netted against sales. Freight charge on sales during 2015 . ... . . .. $4,200 (h) Interest earned but not accrued ... . . . . ... $690 () Depreciation expense on a new forklift purchased March 1, 2015, had not been recognized. (Assume that all equipment will have no salvage value and the straight-line method is used. Depreciation is calculated to the nearest month.) Purchase price. .... .. $7,800 Estimated life in years. .... 10 () A real" account is debited upon the receipt of supplies. Supplies on hand at year-end. . ..... $1,600 (k) Income tax rate (on all items) ... 35% (1) Shares of common stock outstanding 39,000