The accountant preparing the income statement for Carla Vista, Inc. had some doubts about the appropriate accounting treatment of the seven items listed below during the fiscal year ending December 31, 2020. Assume a tax rate of 20 percent.

1.		Office equipment purchased January 1, 2020 for $57,000 was incorrectly charged to Supplies Expense at the time of purchase. The office equipment has an estimated three-year service life with no expected salvage value. Carla Vista uses the straight-line method to depreciate office equipment for financial reporting purposes. This error has not been corrected.
2.		The corporation disposed of its sporting goods division during 2020. This disposal meets the criteria for discontinued operations. The division correctly calculated income from operating this division of $111,000 before taxes and a loss of $11,900 before taxes on the disposal of the division. All of these events occurred in 2020 and have not been recorded.
3.		The company recorded advances of $12,800 to employees made December 31, 2020 as Salaries and Wages Expense.
4.		Dividends of $12,800 during 2020 were recorded as an operating expense.
5.		In 2020, Carla Vista changed its method of accounting for inventory from the first-in-first-out method to the average cost method. Inventory in 2020 was correctly recorded using the average cost method. The new inventory method would have resulted in an additional $128,000 of cost of goods sold (before taxes) being reported on prior years' income statement.
6.		On January 1, 2016, Carla Vista bought a building that cost $88,700, had an estimated useful life of ten years, and had a salvage value of $5,600. Carla Vista uses the straight-line depreciation method to depreciate the building. In 2020, it was estimated that the remaining useful life was eight years and the salvage value was zero. Depreciation expense reported on the 2020 income statement was correctly calculated based on the new estimates. No adjustment for prior years' depreciation estimates was made.

For each item, record corrections to income from continuing operations before taxes, if any. (If there is no effect then please enter 0.) Increase (Decrease) to Income from Continuing Operations No. 1. $ Description Office equipment purchased January 1, 2020 for $57,000 was incorrectly charged to Supplies Expense at the time of purchase. The office equipment has an estimated three-year service life with no expected salvage value. Carla Vista uses the straight-line method to depreciate office equipment for financial reporting purposes. This error has not been recorded. The corporation disposed of its sporting goods division during 2020. This disposal meets the criteria for discontinued operations. The division correctly calculated income from operating this division of $111,000 before taxes and a loss of $11,900 before taxes on the disposal of the division. All of these events occurred in 2020 and have not been recorded. 2. $ 3. The company recorded advances of $12,800 to employees made December 31, 2020 as Salaries and Wages Expense. $ 4. 5. $ Dividends of $12,800 during 2020 were recorded as an operating expense. In 2020, Carla Vista changed its method of accounting for inventory from the first-in-first-out method to the average cost method. Inventory in 2020 was correctly recorded using the average cost method. The new inventory method would have resulted in an additional $128,000 of cost of goods sold (before taxes) being reported on prior years' income statement. On January 1, 2016, Carla Vista bought a building that cost $88,700, had an estimated useful life of ten years, and had a salvage value of $5,600. Carla Vista uses the straight-line depreciation method to depreciate the building. In 2020, it was estimated that the remaining useful life was eight years and the salvage value was zero. Depreciation expense reported on the 2020 income statement was correctly calculated based on the new estimates. No adjustment for prior years' depreciation estimates was made. 6. $ At January 1, 2020, Carla Vista, Inc.'s retained earnings balance was $190,000. Assume that income from continuing operations (before taxes) and after correctly considering all of the six additional items was $1,375,000. Prepare the income statement. Carla Vista Incorporated Partial Income Statement At January 1, 2020, Carla Vista, Inc.'s retained earnings balance was $190,000. Assume that income from continuing operations (before taxes) and after correctly considering any of the six additional items was $1,375,000. Prepare the retained earnings statement. (List items that increase retained earnings first.) Carla Vista Incorporated Retained Earnings Statement