1. When reviewing your Company's income statement for the year ended December 31, 2020, you have concerns about the accounting treatment for the following items.

   For each item a., b., and c.:

   • Explain the impact (in dollars) of the correction to income from continuing operations for the year

     ended December 31, 2020 and include computations for amounts.

   • If there is no impact to income from continuing operations, then so state.

   • For items that do not affect income from continuing operations, state where the item should be reported and in what amount (show computations).

   • Assume the Company's tax rate is 19%. Round all amounts to whole dollars.

   A) Office equipment purchased June 1, 2020 for $63,000 was charged to Supplies Expense at the time of purchase. The office equipment has an estimated six-year service life with no expected salvage value. The Company uses the straight-line method to depreciate office equipment for financial reporting purposes. B) The Company disposed of its sporting goods division during 2020. This disposal meets the criteria for discontinued operations. The 2020 income from operating this division is $150,000 before taxes and there is a gain of $350,000 before taxes on the disposal of the division. All of these events occurred in 2020 and have been recorded in as revenues, expenses, gains and losses in the companys income statement. C) Dividends of $25,000 declared and paid during 2020 were recorded as other operating expense.