Income Statement, Statement of Retained Earnings, and Balance Sheet The following list, in alphabetical order, shows the various items that regularly appear on the financial statements of Sterns Audio Book Rental Corp. The amounts shown for balance sheet items are balances as of December 31, 2008 (with the exception of retained earnings, which is the balance on January 1, 2008); and the amounts shown for income statement items are balances for the year ended December 31, 2008.

Required 1. Prepare an income statement for the year ended December 31, 2008.
2. Prepare a statement of retained earnings for the year ended December 31, 2008.
3. Prepare a balance sheet at December 31, 2008.
4. You have $1,000 to invest. On the basis of the statements you prepared, would you use it to buy stock in this company? Explain. What other information would you want before deciding?

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Accounts payable $ 4,500 Dividends paid during the year $ 12,000 Accounts receivable 300 Notes payable 10,000 Advertising expense 14,500 Rental revenue 125,900 Audiotape inventory 70,000 Rent paid on building 60,000 Capital stock 50,000 Retained earnings 35,390 Cash 2,490 Salaries and wages expense 17,900 Display fixtures 45,000 Water, gas, and electricity 3,600