*P3.4 (LO 2, 3, 6) Groupwork (Income Statement Items) Maher AG reported income before income tax during 2025 of €790,000. Additional transactions occurring in 2025 but not considered in the

€790,000 are as follows.

1. The company experienced an uninsured flood loss in the amount of €90,000 during the year.

2. At the beginning of 2023, the company purchased a machine for €54,000 (residual value of €9,000)

that had a useful life of 6 years. The bookkeeper used straight-line depreciation for 2023, 2024, and 2025 but failed to deduct the residual value in computing the depreciation base.

3. Sale of securities held as a part of its portfolio resulted in a gain of €47,000.

4. The company disposed of its recreational division at a loss of €115,000 before taxes. Assume that this transaction meets the criteria for discontinued operations.
5. The company decided to change its method of inventory pricing from average-cost to the FIFO method. The effect of this change on prior years is to increase 2023 income by €60,000 and decrease 2024 income by €20,000 before taxes. The FIFO method has been used for 2025.
Instructions Prepare an income statement for the year 2025, starting with income before income tax. Compute earnings per share as it should be shown on the face of the income statement. Ordinary shares outstanding for the year are 120,000 shares. (Assume a tax rate of 30% on all items.)
*P3.5 (LO 2, 3, 4, 6) (Income Statement, Retained Earnings) The following account balances were included in the trial balance of Twain Corporation at June 30, 2025.
Sales Revenue $1,578,500 Depreciation Expense (sales Sales Discounts 31,150 equipment) $ 4,980 Cost of Goods Sold 896,770 Maintenance and Repairs Expense Salaries and Wages Expense (sales) 56,260 (sales) 6,200 Sales Commissions 97,600 Miscellaneous Selling Expenses 4,715 Travel Expense (salespersons) 28,930 Supplies Expense 3,450 Delivery Expense 21,400 Telephone and Internet Expense Entertainment Expense 14,820 (administration) 2,820 Telephone and Internet Expense Depreciation Expense (office (sales) 9,030 furniture and equipment) 7,250 Property Tax Expense $ 7,320 Income Tax Expense $102,000 Bad Debt Expense (selling) 4,850 Depreciation Understatement Maintenance and Repairs Expense Due to Error—2023 (net of tax) 17,700 (administration) 9,130 Dividends (declared on Office Expenses 6,000 preference shares) 9,000 Sales Returns and Allowances 62,300 Dividends (declared on Dividend Revenue 38,000 ordinary shares) 37,000 Interest Expense 18,000 The Retained Earnings account had a balance of $337,000 at July 1, 2024. There are 80,000 ordinary shares outstanding.
Instructions Prepare an income statement and a retained earnings statement for the year ended June 30, 2025.