For December 31, 20X1, the balance sheet of Baxter Corporation was as follows: Current Assets Liabilities $ 15,000 Accounts payable. $ 17,000 Cash. Accounts receivable. 20,000 Notes payable. 25,000 30,000 Bonds payable . 12,500 Inventory. 55,000 Prepaid expenses. Fixed Assets Stockholders' Equity Plant and equipment (gross) . $255,000 Preferred stock. $ 25,000 Less: Accumulated Common stock. 60,000 depreciation. 51,000 Paid-in capital . $204,000 Retained earnings. 30,000 Net plant and equipment. 69,500 Total liabilities and Total assets.. $281,500 stockholders' equity. $281,500 Sales for 20X2 were S245,000, and the cost of goods sold was 60 percent of sales. Selling and administrative expense was S24,500. Depreciation expense was 8 percent of plant and equipment (gross) at the beginning of the year. Interest expense for the notes payable was 10 percent, while the interest rate on the bonds payable was 12 percent. This interest expense is based on December 31, 20X1 balances. The tax rate averaged 20 percent. $2,500 in preferred stock dividends were paid, and $5,500 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 10 percent. A new machine was purchased on December 31, 20X2, at a cost of $40,000. Accounts payable increased by 20 percent. Notes payable increased by $6,500 and bonds payable decreased by $12,500, both at the end of the year. The preferred stock, common stock, and paid-in capital in excess of par accounts did not change. a. Prepare an income statement for 20X2. b. Prepare a statement of retained earnings for 20X2. c. Prepare a balance sheet as of December 31, 20X2.