Final answer:
The statement of financial position (option D) should be prepared first when creating projected financial statements, followed by the statement of income and the statement of cash flows. The statement of retained earnings is prepared last.
Step-by-step explanation:
The statement of financial position, also known as the balance sheet, should be prepared first when creating projected financial statements. This statement provides a snapshot of a company's assets, liabilities, and owners' equity at a specific point in time. It serves as a foundation for preparing the other financial statements.
The statement of income, also known as the income statement, should be prepared second. It shows a company's revenues, expenses, and net income or loss over a specific period. The statement of income is derived from the statement of financial position.
The statement of cash flows should be prepared third. It reports the cash inflows and outflows from a company's operating, investing, and financing activities. It is also derived from the statement of financial position and the statement of income.
Lastly, the statement of retained earnings is prepared. It shows the changes in retained earnings over a specific period, including net income, dividends, and adjustments. The statement of retained earnings is derived from the statement of income and the statement of cash flows.