Prepare the income statement, statement of retained earnings, and balance sheet (Learning Objective 6) 20–25 min.

McKnight, Inc., restores antique automobiles. The retained earnings balance of the corporation was $23,500 at December 31, 2013. During 2014, the corporation paid $40,000 in dividends to its stockholders. At December 31, 2014, the business’s accounting records show these balances:

Requirement 1. Prepare the following financial statements for McKnight, Inc.:

a. Income statement for the year ended December 31, 2014

b. Statement of retained earnings for the year ended December 31, 2014

c. Balance sheet at December 31, 2014.

AppendixLO1

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Accounts Receivable Note Payable........... $ 8,000 Cash........... $17,000 16,000 Accounts Payable. 9,000 Retained Earnings..... ? Advertising Expense...... 5,500 Salaries Expense.. 13,000 Service Revenue 88,000 Equipment.... 65,000 Common Stock. 20,000 Insurance Expense...... 8,000