Carlotta’s Cakes Inc. is a private company reporting under ASPE

Prepare financial statements.(LO 3, 5) APCarlotta’s Cakes Inc. is a private company reporting under ASPE. It is authorized to issue an unlimited number of common and $3 cumulative preferred shares. The following is an alphabetical list of its adjusted accounts at May 31, 2017, its fiscal year end. All accounts have normal balances..364px;=”” collapse;=”” 12px=””>Accounts payable$?38,500Income tax expense$?11,230Accounts receivable15,300Insurance expense7,500Accumulated depreciation—equipment126,000Interest expense4,500Cash20,600Inventory70,220Cash dividends—common50,000Notes payable75,000Cash dividends—preferred7,500Preferred shares150,000Common shares50,000Rent expense24,500Cost of goods sold277,475Retained earnings73,000Depreciation expense42,000Salaries expense67,800Dividend payable7,500Sales504,500Equipment420,000Supplies expense5,875The note payable is due in 2019. There are 10,000 common shares issued and 5,000 preferred shares issued as at May 31, 2017.InstructionsPrepare an income statement, statement of retained earnings, and balance sheet.