a.  Prepare a corrected set of financial statements dated December 31, current year. (You may assume that all of the figures in the company’s adjusted trial balance were reported correctly except for Interest Payable of $240, which was mistakenly omitted in the financial statements prepared by Jack.) 

 

b.  Prepare the necessary year-end closing entries.

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Party Wagon, Inc., provides musical entertainment at weddings, dances, and various other functions. The company performs adjusting entries monthly, but prepares closing entries annually on December 31. The company recently hired Jack Armstrong as its new accountant. Jack's first assignment was to prepare an income statement, a statement of retained earnings, and a balance sheet using an adjusted trial balance given to him by his predecessor, dated December 31, 2011. From the adjusted trial balance, Jack prepared the following set of financial statements: PARTY WAGON, INC. INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2011 Revenue: Party revenue earned $130,000 Unearned party revenue 1,800 Accounts receivable 9,000 Total revenue $140,800 Expenses: Insurance expense $1,800 office rent expense 12,000 Supplies expense 1,200 Dividends 1,000 Salary expense 75,000 Accumulated depreciation: van 16,000 Accumulated depreciation: equipment and music 14,000 Repair and maintenance expense 2,000 6,000 Travel expense Miscellaneous expense 3,600 Interest expense 4,400 137,000 Income before income taxes $ 3,800 Income taxes payable 400 Net income $ 3,400 Party Wagon, Inc., provides musical entertainment at weddings, dances, and various other functions. The company performs adjusting entries monthly, but prepares closing entries annually on December 31. The company recently hired Jack Armstrong as its new accountant. Jack's first assignment was to prepare an income statement, a statement of retained earnings, and a balance sheet using an adjusted trial balance given to him by his predecessor, dated December 31, 2011. From the adjusted trial balance, Jack prepared the following set of financial statements: PARTY WAGON, INC. INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2011 Revenue: Party revenue earned $130,000 Unearned party revenue 1,800 Accounts receivable 9,000 Total revenue $140,800 Expenses: Insurance expense $1,800 office rent expense 12,000 Supplies expense 1,200 Dividends 1,000 Salary expense 75,000 Accumulated depreciation: van 16,000 Accumulated depreciation: equipment and music 14,000 Repair and maintenance expense 2,000 6,000 Travel expense Miscellaneous expense 3,600 Interest expense 4,400 137,000 Income before income taxes $ 3,800 Income taxes payable 400 Net income $ 3,400

Answer rating: 100% (QA)

Step 1 of 15 Financial statements These are the basic elements of financial reporting These are the set of books that a company maintains in order to record its financial transactions The financial st... View the full answer