Question Three: The following income statement was prepared for RAT Co, for the year ended 31/12/2015. Sales Cost of goods old Selling expenses Administrative expenses Other expenses Other income Income before tax Tax Net income Beginning retained earning Dividend Ending retained earning Outstanding ordinary shares (640,000) 500,000 36000 30000 35000 (18000) 57000 19400 37600 134000 12200 159400 200,000shares The following information is available for you: a) Beginning inventory 100,000, purchases 600,000, fright 30000, discount on purchases 42000 and ending inventory 188,000 b) Selling expenses include sales discount 20000 and freight on sales 20009, 3) Administrative expenses include 5000 correction of errors for depreciation expense resulted from change in useful life for 2014. 4) Other expenses include 15000 from looses of discontinuing operation. 5) the company changed its inventory method during 2015 and reflected the change in income statement for the year, but didn't take in consideration the effect of change in principle for the year 2014 which understate the income for 2014 (4000$) Required: Prepare multiple step income statement and retained earnings 31/12/2015 for the company