The Rox Corporation's multiple-step income statement and retained earnings statement for the year ended December 31, 2007, as developed by its bookkeeper, are shown here:

You determine that the account balances listed in the statements are correct but are incorrectly classified in certain cases. No shares of common stock were issued or retired during 2007.

Required
1. Review both statements and indicate where each incorrectly classified item should be classified.
2. Prepare a correct multiple-step 2007 income statement.
3. Prepare a correct 2007 retained earningsstatement.

Transcribed Image Text:

ROX CORPORATION Revenue Statement December 31, 2007 Sales (net) Plus: Income from operations of discontinued Division P (net of $960 income taxes) Less: Dividends declared $1.50 per common share) Net revenues Less: Selling expenses Gross profit Less: Operating expenses $179,000 2,240 (7.500) $173,740 (19,000) $154,740 Interest expense Loss on sale of Division P (net of $1,200 income tax credit) Cost of goods sold Income tax expense on income from continuing operations $ 4,100 2,800 110,700 5,370 Total operating expenses Operating income (122,970 $ 31,770 Miscellaneous items S 1,800 Dividend revenue General and administrative expenses (24,300)(22,500) Income before extraordinary items $ 9,270 inary items s (4,800) Loss on sale of land Correction of error in last year's income (net of $1,500 income taxes) 3,500 1.300) Net income ROX CORPORATION Retained Earnings Statement December 31, 2007 Beginning retained earnings Add: Net income Adjusted retained eamings Less: Loss from expropriation (net of $2,760 income tax credit) Ending retained earnings $ 62,850 7,970 70,820 6,440)