(L.OBJ. 5) Preparing a corrected combined statement of income and retained earnings [25-...

(L.OBJ. 5) Preparing a corrected combined statement of income and retained earnings [25-35 min]

Joseph Hill, accountant for Complete Home Finance, was injured in a boating accident. Another employee prepared the following income statement for the year ended December 31, 2010:

The individual amounts listed on the income statement are correct. However, some accounts are reported incorrectly, and two items do not belong on the income statement at all. Also, income tax has not been applied to all appropriate figures. The income tax rate on discontinued operations is 40%. Complete Home issued $5,000 shares of common stock in 2010 and held 5,000 shares as treasury stock during 2010. Retained earnings at December 31, 2009 was $168,000.

Requirement

1. Prepare a corrected combined statement of income and retained earnings for the fiscal year ended December 31, 2010. Prepare the income statement in single step format.