P4.6

(Statement Presentation) Presented below is a combined income

and retained earnings statement for Sapporo Ltd. for 2019 (amounts in thousands).

Net sales \640,000

Costs and expenses

Cost of goods sold \500,000

Selling, general, and administrative expenses 66,000

Other, net 17,000 583,000

Income before income tax 57,000

Income tax 19,400

Net income 37,600

Retained earnings at beginning of period, as previously reported 141,000

Adjustment required for correction of error (7,000)

Retained earnings at beginning of period, as restated 134,000

Dividends on ordinary shares (12,200)

Retained earnings at end of period \159,400

Additional facts are as follows.

1. Selling, general, and administrative expenses for 2019 included a charge of

\8,500,000 for impairment of intangibles.

2. Other, net for 2019 was a loss on sale of equipment of \17,000,000.

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. Sapporo Company disclosed earnings per 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

Sapporo Ltd. 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.)