Relax Spa Company is engaged in providing facial and body treatment in a spa centre. Customers are required to purchase spa coupons in advance. Coupons are redeemed when customers complete the treatment and the Company records income. The Company also sells day pass for using the spa facilities and records income. The Company records all income in “Service revenue”. Adjusting entries are performed on a monthly basis. Closing entries are performed annually on December 31. Below is the Company’s unadjusted trial balance at the year ended 31 December, 2021. Relax Spa Company Unadjusted Trial Balance 31 December, 2021 Account Title Debit $ 428,800 10,000 72,000 13,000 240,000 80,000 Credit $ Cash Accounts receivable Prepaid rent Supplies Equipment Accumulated depreciation: Equipment Accounts payable Income taxes payable Unearned revenue 8% Notes payable Interest payable Share capital ($2 per share) Retained earnings Service revenue Salaries expense Rent expense Insurance expense Depreciation expense: Equipment Supplies expense Interest expense Income taxes expense 48,000 18,200 42,000 84,000 2,800 200,000 57,160 608,000 100,000 182,000 24,000 40,000 6,000 6,160 18,200 $1,140,160 $1,140,160 Page 2 Information on adjusting entries: (1) Accrued, but unrecorded and unpaid Salaries amounted to $14,000. (2) On 1 July 2021, The Company borrowed $84,000 by signing a 2-year note payable at 8% annual interest rate. The entire note, plus 2 years’ accrued interest, is due on 30 June 2023. (3) During December 2021, the Company purchased supplies costing $1,000 by cash. No entry has been made. Supplies on hand were $12,000 on 31 December, 2021. (4) On 1 August, 2021, the company paid for the rental of spa centre for 12 months in advance. (5) Spa coupons amounting $16,000 were redeemed in December 2021 for treatment. (6) The Company estimated that the income taxes expense for the entire year was $24,800, which to be paid next year. (7) On 31 December, 2021, a customer has bought a 2-day pass for using the spa facilities on 31 December, 2021 and January 1, 2022 for $2,000. The total amount for the 2-day pass will be paid by the customer when departing on January 1, 2022. (8) On 31 December, 2021, the owner has purchased a fitness equipment amounting $120,000 for her personal use. (9) The estimated useful life of equipment is five years and straight-line depreciation method is adopted. Depreciation expense had been updated to end of October 2021. (10) On 31 December, 2021, the Company declared a cash dividend of $0.20 per share to be paid on 31 March 2022. Required: (b) Prepare the income statement for the year ended 31 December 2021, showing breakdown of items under the captions of Revenues, Expenses, Profit before Taxes, Profit after Taxes.