Santo Design Agency was founded by Thomas Grant in January 2004. Presented below is the adjusted trial balance as of December 31, 2008.

Instructions
(a) Prepare an income statement and a statement of retained earnings for the year ending December 31, 2008, and an unclassified balance sheet at December 31.
(b) Answer the following questions.
(1) If the note has been outstanding 6 months, what is the annual interest rate on that note?
(2) If the company paid $17,500 in salaries in 2008, what was the balance in Salaries Payable on December 31,2007?

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Santo Design Agency Adjusted Trial Balance December 31, 2008 Dr. Cr 11,000 Cash Accounts Receivable Art Supplies Prepaid Insurance Printing Equipment Accumulated Depreciation Accounts Payable Interest Payable Notes Payable Uneaned Advertising Revenue Salaries Payable Common Stock Retained Earnings Advertising Revenue Salaries Expense Insurance Expense Interest Expense Depreciation Expense Art Supplies Expense Rent Expense 21,500 5,000 2,500 60,000 35,000 5,000 150 5,000 5,600 1,300 10,000 3,500 61,500 11,300 850 500 7,000 3.400 4,000 $127,050 $127,050