West Co. is a flooring retailer who operates in most of the metropolitan areas along the Eastern seaboard. A partial trial balance showing Wests equity, revenue and expense balances as of its December 31, 2020 year-end follows:

	Debits	Credits
Dividends	192,580
Retained earnings (1/1/20)		634,715
Net unrealized loss on JMD bonds (1/1/20)	31,490
Dividend revenue		46,130
Interest revenue		17,205
Sales revenue		6,538,920
Bad debt expense	112,085
Cost of goods sold	4,326,860
Depreciation expense	189,345
Interest expense	76,280
Salaries and wages expense	1,253,570
Utilities expense	171,610

In addition, the following information is available for the company for 2020. Unless indicated otherwise, this information has not yet been reflected in the companys accounts. All of the dollar amounts are stated on a before-tax basis.

1. West restructured its ongoing operations during 2020, resulting in restructuring charges of $57,360.

2. At year-end 2020, West decided to change its inventory cost flow method from Last-in, First-out (LIFO) to Average Cost. The effect of the change on 2020 and prior years is as follows:

	2020	Prior Years
Cost of goods sold LIFO	$4,326,860	$14,711,000
Cost of goods sold Average Cost	4,208,515	14,587,000

Note The cost of goods sold figure in Wests partial trial balance above reflects use of the old method (LIFO) for 2020.

3. In July 2020, West extinguished 8% bonds payable having a book value of $276,215. West paid the investors $241,460 to retire these bonds.

4. In 2018, West purchased certain equipment and began using it. In the process of preparing the adjusting entries at year-end 2020, West discovered that it mistakenly double-counted the equipments estimated salvage value in the depreciation calculations for 2018 and 2019. The total amount of understatement of depreciation expense for these two years was $23,790.

Note The discovery and correction of the 2018 and 2019 errors will not change the depreciation expense for 2020. The $189,345 figure in the partial trial balance above is correct.

5. In July 2020, West shifted its business strategy, resulting in the November 2020 sale of a component of the company considered a separate major line of business. The sale produced a gain on disposal of $206,170. The operations of the component, prior to the sale in October, produced a loss of $61,915.

6. In preparing its 2020 financial statements, West has determined that it must write down certain of its trademark assets by a total of $86,370.

7. In 2017, West purchased bonds issued by JMD Co., which it continues to hold as an available-for-sale investment. The fair value of Wests investment decreased in 2020, from $403,265 to $356,520.

Note The $31,490 Net unrealized loss on JMD bonds (1/1/20) in the partial trial balance above relates to this item and, of course, is stated net of income taxes.

8. At year-end 2020, West is reviewing the percentage it uses to estimate bad debts. With economic conditions deteriorating in 2020, the company determines that it must increase the percentage it uses to estimate bad debts from 4.30% to 7.15%. The effect of this change on 2020 income is as follows:

Bad debt expense based on a 4.30% rate (old rate)	$112,085
Bad debt expense based on a 7.15% rate (new rate)	174,630

Note The bad debt expense figure in the partial trial balance above reflects use of the old rate (4.30%) for 2020.

Assume the above amounts are material. Also, assume the income tax rate applicable to all years and all income items is 30%. Finally, note that West uses the multiple-step format for the reporting of net income items and the one-income statement approach for the display of other comprehensive income items.

Instructions

Prepare the financial statements for the year ended December 31, 2020 to show the proper reporting of Wests:

(a) income and <12.0>

(b) changes in retained earnings. <3.0>