The following data were taken from the records of Wathen Company. Except as otherwise indicated, all balances are as of December 31, 2013, before the closing entries had been recorded.

Consulting revenue .............. $18,200

Cash ..................... 35,600

Cash received from common stock issued during 2013 . 6,000

Travel expense ................. 2,100

Dividends ................... 4,000

Cash flow from investing activities ......... 5,200

Rent expense ................... 3,500

Payment to reduce debt principal ......... 10,000

Retained earnings, January 1, 2013 ......... 16,200

Salary expense ................. 7,200

Cash flow from operating activities ......... 2,600

Common stock, December 31, 2013 ........ 16,000

Other operating expenses ............. 2,300

Required

a. Identify the accounts that should be closed to the Retained Earnings account.

b. Prepare the income statement that Wathen would include in its 2013 annual report.

c. Determine the Retained Earnings account balance at December 31, 2013. Explain how the company could pay cash dividends in excess of the amount of net income earned in 2013.

d. Name the stages of the accounting cycle in the order in which they normally occur.