Preparing a corrected combined statement of income and retained earnings [25-35 min]Jim He...

Preparing a corrected combined statement of income and retained earnings [25-35 min]

Jim Heller, accountant for Complete Home Finance, was injured in a boating accident. Another employee prepared the accompanying income statement for the year ended December 31, 2012.

The individual amounts listed on the income statement are correct. However, some accounts are reported incorrectly, and two items do not belong on the incomestatement at all. Also, income tax has not been applied to all appropriate figures. Theincome tax rate on discontinued operations was 40%. Complete Home Finance issued55,000 shares of common stock in 2012 and held 5,000 shares as treasury stock during 2012. Retained earnings at December 31, 2011, was $167,000.

Requirement

1. Prepare a corrected combined statement of income and retained earnings for the fiscal year ended December 31, 2012, including earnings per share. Prepare theincome statement in single-step format.