Total liabilities and equity $ 355,200 $ 322,300 Income Statement For Year Ended December 31, Year 2 Sales Cost of goods sold Gross profit Operating expenses (excluding depreciation) Depreciation expense Other gains (losses) Gain on sale of machinery Income before taxes Income taxes expense Net income Additional Information $ 713,000 418,000 295,000 74,000 65,600 155,400 2,700 158,100 44,590 $113,510 a. A $30,000 note payable is retired at its $30,000 carrying (book) value in exchange for cash. b. The only changes affecting retained earnings are net income and cash dividends paid. c. New machinery is acquired for $64,600 cash. d. Received cash for the sale of machinery that had cost $55,600, yielding a $2,700 gain. e. Prepaid Expenses and Salaries Payable relate to Operating Expenses on the income statement. f. All purchases and sales of inventory are on credit.