Mystic Masters, Inc., provides fortune-telling services over the Internet. In recent years the company has experienced severe financial difficulty. Its accountant prepares adjusting entries on a monthly basis, and closing entries on an annual basis, at December 31. An adjusted trial balance dated December 31, 2011, follows.

Instructions
a. Prepare an income statement and statement of retained earnings for the year ended December 31, 2011. Also prepare the company’s balance sheet dated December 31, 2011.
b. Prepare the necessary year-end closing entries.
c. Prepare an after-closing trial balance.
d. Using the financial statements prepared in part a, briefly evaluate the company’s performance.
Identify information that the company is apt to disclose in the notes that accompany the financial statements prepared in parta.

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MYSTIC MASTERS, INC. ADJUSTED TRIAL BALANCE DECEMBER 31, 2011 Debits Credits Cash Accounts receivable Unexpired insurance.··········· Prepaid rent $960 300 2,000 ,500 200 8,400 Furniture and fixtures .. Accumulated depreciation: furniture and fixtures Accounts payable . Notes payable Salaries payable $5,200 6,540 24,000 1,700 360 200 4,000 2,600 52,000 Capital stock Hetained eamings. Client revenue earned . . Insurance expense Office rent expense . supplies expense . ············ Salary expense 6,000 9,000 440 48,000 1,400 3,000 4,900 1,500 4,000 5,000 Office and telephone expense Legal expense Interest expense ··· Miscellaneous expense $96,600 $96,600