Introduction

Its so hard to believe that its been two full years since you launched Karen, Inc. Although you knew your concept would be a success, you had no idea just how successful youd be in just two years. To expand into other markets, you need additional capital, but youre reluctant to sell more stock because you want to retain as much ownership as possible before taking the company public.

You decide to borrow funds from the Bank of Maxxus. Mark, the highly competent loan officer was excited to get started on your loan application. He too knew your concept was going to be a big hit and was excited to get your business. First, Mark insisted on seeing the companys 20X2 financial statements. With confidence and knowing you have a BA in accounting, you stand up, shake his hand firmly, and proudly say, that will be no problem Mark...Ill have the financial statements to you by the date you requested. Mark handed you a list of financial statements he needed and you both said goodbye.

You leave the Bank of Maxxus and return to the office in the back of your store to start compiling all documents necessary to prepare financial statement.

Directions: Prepare a statement of retained earnings.

Your list of account balances from the General Ledger: 20x2 20x1 Accounts Payable 2018 1686 Accounts Receivable 2125 2362 Short Term Notes Payable 450 375 Accumulated Depreciation: PP&E 702 600 Long-Term Liabilities 2750 2200 Cash 1918 1320 Cash Dividends 140 N/A Common Stock 3490 2141 Depreciation Expense 102 N/A Cost of Goods Sold 8001 N/A Property Plant & Equipment 6452 4637 Interest Expense 178 N/A Income Tax Expense 124 N/A Inventory 1458 1315 Retained Earnings 2043 1707 Sales 11428 N/A Selling & Administrative Expenses 2547 N/A Bonds Payable 500 925 Income Statement of Karen Inc For Year Ended 20x2 Sales. 11428 Cost of Goods Sold. -8001 Gross Profit. 3427 Operating Expenses Selling & Administration Exp. -2547 Depreciation. -102 Operating Income. 778 Interest Expenses. -178 Profit Before Taxes. 600 Income Tax Expenses. -124 Divident Expense. -140 Profit After Tax. 336 Balance Sheet For Karen Inc. For Year 20x2 Amount Assets Current Assets Cash 1918 Accounts Receivable 2124 Total Crrent Assets 40431 Non Current Assets Property, Plant & Equipment 64521 (Less Accumulated Depreciation) 702 5750 Inventory 1458) Total Non Current Assets 7208 Total Assets 11251 2018 450 Liabilities Current Liabilities Accounts Payable Short-Term Notes Payable TotalCurrent Liaibilities Long-Term Liability Bonds Payable Total Liabilities Stockholder Equity Common Stock Retained Earnings Total Stookholders Equity Liabilities & Stockholder Equity 2750 500 5718 3490 20431 5533 11251