Little Tots Ltd. sells children’s clothing. At the end of December 2016 (its first year of operations), it had the following account balances:

Accounts receivable ..................$ 2,500

Rent expense .................... 3,600

Cash .......................... 3,500

Wages payable ...................... 400

Equipment ...................... 5,000

Depreciation expense ............... 500

Wage expense ....................26,000

Prepaid rent ...................... 300

Cost of goods sold ................34,900

Sales revenue ....................69,900

Bank loan payable (due in two years)........ 4,800

Advertising expense ................ 800

Accounts payable ..................2,000

Utilities expense .................... 300

Dividends declared ...............1,200

Common shares .................... 10,000

Interest expense ................ 100

Inventory .......................8,000

Miscellaneous expenses ................ 400

Retained earnings ................. ?

Required:

a. Calculate the net income for the year by adding the revenue and deducting all the expenses.

b. Calculate the retained earnings by following the process outlined below:

Balance in retained earnings at the beginning of the year......... $ 0*

Add: Net income for the year......................... ?

Deduct: Dividends declared during the year

Balance in Retained Earnings at the end of the year............. U

*The beginning balance is zero because this was the company’s first year of operations.

c. Prepare a classified statement of financial position.