You have been hired by the CFO of Dalmatian Corporation, a public company. As the new senior accountant, you have been asked to help with the preparation of the 2016 income statement. For 2016, Dalmatian reported pre-tax income from continuing operations of $3,150,000. However, you have been advised that the following transactions have not yet been considered.

1. A review of the company's depreciation policies for its computer equipment revealed that depreciation expense relating to 2015 was overstated by $19,000.

2. During the year, the company wrote off $62,500 in accounts receivable for which no allowance for doubtful accounts had been set up.

3. In 2016, the company sold old equipment for $160,000. The equipment had a net book value of $120,000.

4. During the year, Dalmatian disposed of one its subsidiaries. The CFO tells you that the transaction meets the criteria for discontinued operations. The after-tax losses on the subsidiarys operations and from disposal were $120,000 and $290,000 respectively.

5. The company made a payment of $400,000 to settle a lawsuit. The lawsuit related to a 2012 event which the company lawyers had been working on since that time. Based on the lawyers advice, no contingent liability had been set up.

Instructions: In good form, prepare a partial 2016 income statement for Dalmatian, taking into account the effects (if any) of the above items. The statement should start with income from continuing operations before income taxes. You will have to calculate the income from continuing operations and must show your calculations. Unless otherwise indicated, you may assume an income tax rate of 40% for all items. Earnings per share calculations are not required.