PROBLEM TWO Harley Ltd decided to sell its Distribution Division. After two years of losses and heavy competition, a plan to dispose of the division was put in place. At the end of 2023, the plan was finalized and approved by the board of directors. The sale is anticipated to be completed by June 30, 2024. Other information: 1. Harley's 2023 after-tax net income (excluding the results from the Distribution Division) was $450,000 2. During the year, the division reported an after-tax loss of $120,000 (revenues: $30,000, expenses: $150,000). 3. Management estimates costs to sell will include after-tax legal and audit fees of $32,000 as well as severance payments of $66,000. A portion of these costs is expected to be offset by the after-tax proceeds of $61,000 from the sale of the division's assets. Instructions Assuming the Industrial Design Division qualifies for treatment as a discontinued operation, prepare a partial income statement for Harley for 2023. The statement should begin with income from continuing operations. Harley's tax rate is 25%. Embassy Enterprises' capital structure consists of 20,000 common shares. At December 31, 2023, an analysis of the accounts and discussions with company officials revealed the following information: Sales $1,200,000 Purchases.. Purchase discounts Earthquake loss (net of $18,000 tax) 18,000 720,000 42,000 Selling expenses. Cash. Accounts receivable. Common shares. Accumulated depreciation... Dividend revenue. 128,000 60,000 90,000 200,000 180,000 18,000 Inventory, January 1, 2023. 152,000 Inventory, December 31, 2023. Unearned service revenue. I 125,000 4,400 Unrealized Gain, QC 16,300 Accrued interest payable... 1,000 Land 370,000 Patents. 100,000 Retained earnings, January 1, 2023 270,000 Accumulated Other Comprehensive income, January, 1, 2023. 2,200 Interest expense. 17,000 Depreciation not recorded in error in 2022 (net of $15,000 tax). 35,000 General and administrative expenses. 160,000 Dividends declared.. 29,000 Allowance for doubtful accounts. 5,000 Notes payable (maturity July 1, 2026).. 200,000 450,000 40,000 60,000 Machinery and equipment.. Materials and supplies.. Accounts payable. Unless indicated otherwise, you may assume a 30% income tax rate. Instructions a) Prepare, in good form, a multiple-step statement of income and comprehensive income. b) Prepare, in good form, a partial statement of changes in Equity. Include a column for retained earnings and accumulated other comprehensive income.