For December 31, 20X1, the balance sheet of Baxter Corporation was as follows:

Current Assets			Liabilities
Cash	$	26,000	Accounts payable	$	28,000
Accounts receivable		31,000	Notes payable		36,000
Inventory		41,000	Bonds payable		66,000
Prepaid expenses		13,600
Fixed Assets			Stockholders Equity
Gross plant and equipment	$	266,000	Preferred stock	$	36,000
Less: Accumulated depreciation		53,200	Common stock		71,000
			Paid in Capital		41,000
Net plant and equipment	$	212,800	Retained earnings		46,400
Total assets	$	324,400	Total liabilities and stockholders equity	$	324,400

Sales for 20X2 were $300,000, and the cost of goods sold was 55 percent of sales. Selling and administrative expense was $30,000. Depreciation expense was 9 percent of plant and equipment (gross) at the beginning of the year. Interest expense for the notes payable was 11 percent, while the interest rate on the bonds payable was 13 percent. This interest expense is based on December 31, 20X1 balances. The tax rate averaged 25 percent. $3,600 in preferred stock dividends were paid, and $9,410 in dividends were paid to common stockholders. There were 10,000 shares of common stock outstanding. During 20X2, the cash balance and prepaid expenses balances were unchanged. Accounts receivable and inventory increased by 11 percent. A new machine was purchased on December 31, 20X2, at a cost of $51,000. Accounts payable increased by 25 percent. Notes payable increased by $7,600 and bonds payable decreased by $18,000, both at the end of the year. The preferred stock, common stock, and capital paid in excess of par accounts did not change.

a. Prepare a statement of retained earnings for 20X2.