The adjusted trial balance of Fairhaven Trading at December 31, 2025 is shown below.
| Account | Debit | Credit |
|---|
| Cash | 50,800 | |
| Accounts Receivable | 54,000 | |
| Allowance for Doubtful Accounts | | 3,800 |
| Inventory | 38,500 | |
| Prepaid Insurance | 2,400 | |
| Equipment | 66,000 | |
| Accumulated Depreciation - Equipment | | 19,800 |
| Accounts Payable | | 24,600 |
| Interest Payable | | 600 |
| Income Taxes Payable | | 1,500 |
| Notes Payable (due 2028) | | 18,000 |
| Share Capital - Ordinary | | 80,000 |
| Retained Earnings (January 1) | | 33,400 |
| Sales Revenue | | 290,000 |
| Sales Returns and Allowances | 6,000 | |
| Cost of Goods Sold | 174,000 | |
| Salaries and Wages Expense | 43,000 | |
| Rent Expense | 14,400 | |
| Bad Debt Expense | 2,900 | |
| Depreciation Expense | 6,600 | |
| Insurance Expense | 1,200 | |
| Interest Expense | 1,900 | |
| Income Tax Expense | 10,000 | ____ |
| 471,700 | 471,700 |
Instructions:
- Prepare a multi-step income statement for the year ended December 31, 2025.
- Prepare a classified statement of financial position at December 31, 2025, showing accounts receivable at its gross amount less the allowance for doubtful accounts. (Retained earnings must be updated for the year's net income; no dividends were declared.)