Jackson Co. has compiled the following account balances from its general ledger on September 30, 20Y8 (the last day of its fiscal year).

+ Trial Balance

Account	Amount
Cash	$62,050
Accounts receivable	149,240
Inventory	195,430
Prepaid insurance	24,560
Equipment	492,380
Accumulated depreciation	83,650
Accounts payable	62,760
Notes payable	108,000
Common stock	200,000
Dividends	52,000
Retained earnings	280,280
Sales	3,376,770
Rent revenue (Nonoperating)	19,280
Cost of goods sold	2,389,630
Interest expense (Nonoperating)	15,270
Selling/general/administrative expense	548,490
Research and development expense	164,150
Depreciation expense	37,540

The balance in the Retained Earnings account reflects the account balance before temporary accounts are closed. In addition, the Notes Payable balance includes notes payable of $20,500 due within the next year and $87,500 of notes payable that are not due for several years. Use the information given to create Jackson Co.s annual financial statements. Construct Jacksons multiple-step income statement for 20Y8.

Jackson Co.
Income Statement (Multiple-step)
For the Year Ending September 30, 20Y8
Sales		$
Cost of goods sold
Gross profit		$
Operating expenses
Selling/general/administrative expense	$
Research and development expense
Depreciation expense
Total operating expenses		$
Operating income		$
Other revenues and expenses
Rent revenue (nonoperating)	$
Interest expense (nonoperating)
Total other revenues and expenses		$
Net income		$

Feedback

Click on the sample multiple-step income statement above to review its structure. Then select the accounts from the trial balance that best fit each section.

APPLY THE CONCEPTS: Construct the statement of retained earnings

The statement of retained earnings shows the change in retained earnings as a result of net income and any dividends declared. It also serves as an important link between the income statement and the balance sheet in that it translates the effects of net income into an updated number for retained earnings. Construct Jacksons retained earnings statement for 20Y8.

Jackson Co.
Retained Earnings Statement
For the Year Ending September 30, 20Y8
Retained earnings, October 1, 20Y7		$
Add: Net Income	$
Less: Dividends
Increase in retained earnings
Retained earnings, September 30, 20Y8		$

Feedback

The retained earnings statement tracks additions and subtractions from the retained earnings account through the year. The amount shown in the Trial Balance above is the beginning retained earnings.

You then need to account for the effect of the net income, as shown on the income statement of the prior step, as well as any dividends paid, in order to arrive at a final balance in the retained earnings account.

APPLY THE CONCEPTS: Construct the balance sheet

The balance sheet, also known as the statement of financial position, shows the companys assets and the claims against those assets in the form of liabilities and stockholders equity. Unlike financial statements that display financial performance over a given interval of time, the balance sheet is a snapshot of a financial position at a given point in time.

Construct Jacksons balance sheet in account form for 20Y8.

Jackson Co.
Balance Sheet
September 30, 20Y8
Assets
Current assets
Cash	$
Accounts receivable
Inventory
Prepaid insurance
Total current assets		$
Property, plant, and equipment
Equipment	$
Less accumulated depreciation
Total property, plant, and equipment
Total assets		$
Liabilities
Current liabilities
Accounts payable	$
Notes payable (current portion)
Total current liabilities		$
Long-term liabilities
Notes payable (long-term portion)
Total liabilities		$
Stockholders' Equity
Common stock	$
Retained earnings
Total stockholders equity		$
Total liabilities and stockholders equity		$