The ledgers of MidCity Galleries Inc. contain the following balances as of December 31, 2006.

Advertising expense ........... $ 123,000

Commission expense on art sales ..... 1,200,000

Depreciation expense (administrative) ..... 98,000

Dividend revenue .............. 50,000

Insurance expense ............ 600,000

Interest expense .............. 98,000

Inventory, January 1 ........... 1,650,000

Inventory, December 31 ......... 1,424,000

Loss on the sale of office equipment ...... 21,300

Miscellaneous administrative expenses ..... 53,200

Miscellaneous selling expenses ........ 39,000

Net purchases ............. 3,200,000

Net sales ............... 9,275,000

Rent expense ............... 808,000

Freight-in ................. 232,000

Freight-out ................. 82,500

Utilities expense .............117,000

Wages and salaries ............1,264,000

Income taxes are calculated at 30 percent of income. The galleries had 90,000 shares of common stock outstanding for the entire year. Total assets amounted to $7,509,000, and common stockholder's equity was $3,975,400.

Instructions

(a) Prepare in good form a multiple-step income statement for MidCity Galleries.

(b) Calculate three measures of profitability and one ratio of solvency.