Gear Heads, Inc. restores antique automobiles. The common shares and retained earnings balances of the corporation were

Question:

Gear Heads, Inc. restores antique automobiles. The common shares and retained earnings balances of the corporation were $20,000 and $32,000 respectively at December 31, 2012. During 2013, the corporation paid $40,000 in dividends to its shareholders. At December 31, 2013, the business’s accounting records show these balances:

Accounts Receivable $5,000

Note Payable 25,000

Retained Earnings ?

Salary Expense 14,000

Equipment 78,000

Insurance Expense 4,000

Cash $ 7,000

Accounts Payable 2,000

Advertising Expense 3,000

Service Revenue 72,000

Common Shares 20,000

Requirement

Prepare the following financial statements for Gear Heads, Inc.:

a. Income statement for the year ended December 31, 2013

b. Statement of retained earnings for the year ended December 31, 2013

c. Statement of financial position at December 31, 2013

Financial Statements
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