Sara’s Bakery had the following account balances at the end of 2016:

Supplies ................. $ 4,000

Wage expense ............. 42,000

Sales...............178,000

Cash.................. 24,000

Supplies expense.............. 14,000

Accounts payable............ 8,000

Rent expense............. 12,000

Common shares........... 90,000

Accounts receivable............ 10,000

Cost of goods sold......... 101,000

Equipment............. 87,500

Depreciation expense ........... 2,500

Retained earnings............ 22,500

Dividends declared........... 2,000

Prepaid rent............. 1,000

Wages payable ............ 1,500

Required:

a. Prepare a statement of income for the year ended December 31, 2016.

b. In answering part “a,” you did not need to use all the accounts provided. For each item that you did not use, explain why you did not include it on the statement of income.