Craft Carpentry Limited reports the following statement of financial position accounts, in alphabetical order:

Accounts payable................................................................................$ 6,400

Accounts receivable............................................................................10,800

Bank loan payable................................................................................9,000

Cash.......................................................................................................1,250

Common shares..................................................................................1,000

Equipment.........................................................................................19,400

Income tax payable............................................................................2,000

Interest payable.....................................................................................100

Prepaid insurance.................................................................................600

Retained earnings...........................................................................12,250

Salaries payable ................................................................................1,000

Supplies..............................................................................................1,200

Unearned revenue............................................................................1,500

Instructions

(a) Classify each account as an asset (A), liability (L), or shareholders' equity (SE) item.

(b) Calculate total assets, total liabilities, and total shareholders' equity and prepare Craft Carpentry's accounting equation.

(c) Craft Carpentry's retained earnings was $2,250 at the beginning of the year. The company reported revenues of $72,000, expenses of $50,000, and dividends of $12,000 during the year. Prepare a calculation that proves how retained earnings of $12,250 at the end of the year were determined.