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You have been engaged to issue a review report for Tustin Company for the Year $2$ financial statements. The Year $1$ financial statements were also reviewed by you. Tustin Company has two segments: $(1)$ building and selling homes and $(2)$ renting apartments. Based on your inquiries with management on January $10,$ Year $3,$ you learned about some accounting changes from Year $1$ to Year $2.$ Tustin is going to present comparative financial statements.

For each inquiry response from management, click in the associated cells and select whether the correct accounting treatment for that particular response is to "Retrospectively" apply the change or account for the change "Prospectively."

In addition, assuming there are no other changes than the five mentioned below, determine the amounts that you believe you should see on the comparative financial statements for the income statement presented for Year $1.$ The prior year income statement is presented in the exhibit.

Tustin Company

Income Statement

For the Year Ended December $31,$ Year $1$

Net sales $$3,000,000$

Cost of sales $1,800,000$

Warranty expense $7,000$

General and administrative expenses $200,000$

Depreciation expense $80,000$

Interest income $10,000$

Loss from lawsuit $300,000$

Interest expense $40,000$

Income before taxes

$$583,000$Expected Numbers

for Year $1$

$8$ Net sales

$9$ Cost of sales

$10$ Warranty expense

$11$ General and administrative expenses

$12$ Depreciation expense

$13$ Interest income

$14$ Loss from lawsuit

$15$ Interest expense

$16$ Income before taxes