Visit the SEC's Web site.

Using the information below, do the following:

• Prepare a multiple-step income statement for Music Warehouse.
• Prepare a statement of changes in stockholder's equity for Music Warehouse.

You may work together, or you may assign each group member a different financial statement or part of the assignment to work on.

Music Warehouse
Adjusted Trial Balance
December 31, 2008
	Debit	Credit
Cash	$24,675
Accounts Receivable	5,625
Inventory	65,980
Land	93,000
Building	289,000
Accumulated Depreciation		75,000
Notes Payable		85,000
Accounts Payable		53,600
Interest Payable		4,750
Common Stock		10,000
Additional Paid-in Capital		120,000
Dividends	10,000
Retained Earnings		59,980
Sales		937,500
Sales Discounts	22,675
Cost of Goods Sold	723,000
Salaries	81,000
Utilities	8,900
Repairs & Maintenance	5,225
Telephone	2,850
Interest Expense	4,400
Depreciation Expense	9,500
	$1,345,830	$1,345,830

The following is additional information needed for financial-statement preparation:

• Loss as a result of hurricane damage on the building: $17,000 (assume that the building is not located in an area that sustains frequent hurricane damage.)
• Loss because of the discontinuation of the cassette tape music segment: $26,875
• Beginning of the year balance of common stock: $8,000 (assume that changes are related to issuance of common stock.)
• Beginning of the year balance of additional paid-in capital: $102,000
• Effective income tax rate: 35%