CLASS EXERCISE 1 Studio Photography, Inc., works weddings and prom-type parties. The balance of retained earnings was $16,000 at December 31, 2011. At December 31, 2012, the business's accounting records show these balances: Insurance expense $ 8,000 Accounts receivable $ 8.000 A Cash 37.000 Note payable 12.000 Accounts payable 7.000 Retained earnings * 47.000 x Advertising expense 3.000 Salary expense* 25.000 x Service revenue 80.000 Equipment 50.000 Dividends 31.000 Common stock 29,000 Prepare the following financial statements for Studio Photography, Inc. for the year ended December 31, 2012: a. Income statement b. Statement of retained earnings c. Balance sheet Solution