Based on the information provided, you are required to :

1. Prepare an Income Statement for the year ending December 31;

2. Calculate the Net Profit Margin; and

3. Briefly explain what the profit margin means.

M3-21 Preparing Financial Statements from a Trial Balance The following accounts are taken from Equilibrium Riding, Inc., a company that specializes in occupational therapy and horseback riding lessons, as of December 31 . EQUILIBRIUM RIDING. INC. Required: Using the unadjusted trial balance provided, create a classified Balance Sheet, Statement of Retained Earnings, and Income Statement for Equilibrium Riding, Inc., for the year ended December 31. (These financial statements would be considered "preliminary" because they use unadjusted balances.) TIP: Create the Income Statement first, followed by the Statement of Retained Earnings, and finally the classified Balance Sheet. Follow the formats presented in Exhibits 1.3, 1.4, and 2.13