Following are the accounts and balances (in random order) from the adjusted trial balance of Stark Company.

Notes payable $11,000

prepaid insurance 2500

Interest expense 500

Accounts payable 1500

Wages payable 400

Cash 10,000

Wages expense 7500

Insurance expense 1800

Common stock 10,000

Retained earnings 14,800

Services revenue 20,000

Accumulated depreciation-BuiIdings $15,000

Accounts receivable 4000

Utilities expense 1300

Interest payable 100

Unearned revenue 800

Supplies expense 200

Buildings 40,000

Dividends 3,000

Depreciation expense-BuiIdings 2,000

Supplies 800

Required:

Prepare the:

a. Income statement

b. Statement of retained earnings for the year ended December 31

c. Balance sheet at December 31. The Retained Earnings account balance was $118,800 on December 31 of the prior year.

a. Income statement

Services revenue 20,000

Unearned revenue 800

Total Revenue 20,800

Less Expenses:

Interest expense 500

Wages expense 7,500

Insurance expense 1,800

Utilities expense 1,300

Supplies expense 200

Depreciation expense-BuiIdings 2,000 (13,300)

Net Income 7,500

b. Statement of retained earnings for the year ended December 31

Retained earnings at the beginning of the year 14,800

Add Profit for the year 7,500

Less Dividends Paid (3,000)

Retained earnings at the end of the year 19,300

c. Balance sheet at December 31.

Non - Current Assets

Buildings 40,000

Accumulated depreciation-Buildings (15,000)

Total Non - Current Assets 25,000

Current Assets

Supplies 800

Accounts receivable 4,000

Prepaid insurance 2,500

Cash 10,000

Total Current Assets 17,300

Total Assets 42,300

Equity and Liabilities

Equity

Common stock 10,000

Retained Earnings 19,300

Total Equity 29,300

Non - Current Liabilities

Notes payable 11,000

Total Non - Current Liabilities 11,000

Current Liabilities

Accounts payable 1,500

Wages payable 400

Interest payable 100

Total Current Liabilities 2,000

Total Equity and Liabilities 42,300

Explanation:

The Profit for the year is included in the calculation of the Retained Earnings figure for the end of the year. The retained earnings figure at end of the year is part of Equity in the Balance Sheet.

(Note Income Statement Consist of Revenue Expenditures only, whilst Balance Sheet consists of Assets, Equity and Liabilities).