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prepare income statements and retained earnings sttement

To prepare the Income Statement and Retained Earnings Statement, I will follow these steps based on the provided Adjusted Trial Balance and Additional Information:

### 1. Income Statement
The Income Statement includes revenues, expenses, and taxes to determine the net income for the year. We will categorize relevant items accordingly.

### 2. Retained Earnings Statement
The Retained Earnings Statement begins with the opening retained earnings balance, adds net income, and deducts dividends to calculate the closing retained earnings.

I'll work on these calculations.### Income Statement (for the year ending December 31, 2023)
- **Net Sales**: $715,000
- **Gross Profit**: $356,000
- **Total Operating Expenses**: $656,000
- **Net Income Before Tax**: -$216,000
- **Income Tax** (25%): -$54,000 (negative due to the loss)
- **Net Income After Tax**: -$162,000

### Retained Earnings Statement (for the year ending December 31, 2023)
- **Beginning Retained Earnings**: $61,000
- **Net Income After Tax**: -$162,000
- **Dividends on Ordinary Shares**: $13,000
- **Dividends on Preference Shares**: $10,134
- **Closing Retained Earnings**: -$124,134

This results in a negative closing retained earnings due to the net loss and dividends.

Would you like more details on any part of these calculations, or do you have any specific questions?

### Additional Practice Questions
1. How would changes in the tax rate affect net income?
2. How does sales revenue influence gross profit?
3. What would happen to retained earnings if no dividends were declared?
4. Why is it essential to subtract dividends from retained earnings?
5. How could different expense classifications impact the total operating expenses?

### Tip
Always verify each item in the trial balance to ensure all entries are categorized correctly in financial statements.

Prepare income statements and retained earnings statement.

Learn how to prepare an income statement and retained earnings statement for MarketMakers Enterprises, based on the adjusted trial balance provided. This problem includes calculating net income, gross profit, operating expenses, and adjusting for dividends. Ideal for undergraduate accounting students.

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