Presented below is a combined single-step income and retained earnings statement for Sandy Freewalt Company for 2008.

Additional facts are as follows.

1. “Selling, general, and administrative expenses” for 2008 included a usual but infrequently occurring charge of $10,500,000.

2. “Other, net” for 2008 included an extraordinary item (charge) of $9,000,000. If the extraordinary item (charge) had not occurred, income taxes for 2008 would have been $22,400,000 instead of $19,400,000.

3. “Adjustment required for correction of an error” was a result of a change in estimate (useful life of certain assets reduced to 8 years and a catch-up adjustment made).

4. Sandy Freewalt Company disclosed earnings per common share for net income in the notes to the financial statements.

Instructions

Determine from these additional facts whether the presentation of the facts in the Sandy Freewalt Company income and retained earnings statement is appropriate. If the presentation is not appropriate, describe the appropriate presentation and discuss its theoretical rationale. (Do not prepare a revised statement.)

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(000 omitted) Net sales $640,000 Costs and expenses Cost of goods sold Selling, general, and administrative expenses Other, net 500,000 66,000 17,000 583,000 Income before income tax 57,000 Income tax 19,400 Net income 37,600 $141,000 Retained earnings at beginning of period, as previously reported Adjustment required for correction of error (7,000) Retained earnings at beginning of period, as restated 134,000 Dividends on common stock (12,200) Retained earnings at end of period $159,400