For December 31, 2007, the balance sheet of the Gardner Corporation is as follows

Chapter 2
26. For December 31, 2007, the balance sheet of the Gardner Corporation is as
follows:

AND SO ON

Sales
for the year 2008 were $330,000, with cost of goods sold being 60
percent of sales. Selling and administrative expense was $33,000.
Depreciation expense was 10 percent of plant and equipment (gross) at
the beginning of the year. Interest expense for the notes payable was 10
percent, while interest on the bonds payable was 12 percent. These were
based on December 31, 2007, balances. The tax rate averaged 20 percent.

Two
thousand dollars in preferred stock dividends were paid and $4,100 in
dividends were paid to common stockholders. There were 10,000 shares of
common stock outstanding.

During the year 2008, the cash balance
and prepaid expenses balance were unchanged. Accounts receivable and
inventory increased by 20 percent. A new machine was purchased on
December 31, 2008, at a cost of $60,000.

Accounts payable
increased by 30 percent. At year-end, December 31, 2008, notes payable
increased by $10,000 and bonds payable decreased by $15,000. The common
stock and paid-in capital in excess of par accounts did not change.

a. Prepare an income statement for the year 2008.
b. Prepare a statement of retained earnings for the year 2008.
c. Prepare a balance sheet as of December 31, 2008.