Excerpts from Crozier Industries’ financial records as of December 31, 1997, follow: Sales Sales Returns Costs of Goods Sold Dividends Rent Expense Wages Payable Loss on Sale of Food Services Division Loss Incurred by Food Services Division Depreciation Expense Cumulative Effect on Income of Change in Depreciation Methods Gain on Land Appropriated by the Government Insurance Expense Inventory Administrative Expenses Prepaid Insurance Gain on Sale of Short-Term Investments Debit Credit 977,000 9,000 496,000 50,000 90,000 175,000 2,000 10,000 100,000 130,000 92,000 12,000 576,000 109,000 48,000 142,000 The amounts shown do not include any tax effects. Crozier’s tax rate is 35 percent. Assume that all items are treated the same for accounting and income tax purposes. REQUIRED:

a. Indicate which items should be included on the company’s income statement. Classify each item to be included on the income statement as one of the following. (1) Usual and frequent (2) Unusual or infrequent (3) Disposal of business segment (4) Unusual and infrequent (5) Change in accounting method

b. Prepare an income statement using the single-step format, and assess the persistence of each item on the income statement.