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:

Instructions
a. Prepare a corrected set of financial statements dated December 31, 2011. (You may assume that all of the figures in the company’s adjusted trial balance were reported correctly except for Interest Payable of $200, which was mistakenly omitted in the financial statements pre-pared by Jack.)
b. Prepare the necessary year-end closing entries.
c. Using the financial statements prepared in part a, briefly evaluate the company’s profitability andliquidity.

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PARTY WAGON, INC. INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2011 Revenue Party revenue earned Unearned party revenue. Accounts receivable Total revenue. $130,000 1,800 9,000 $140,800 Expenses: Insurance expense _. Office rent expense Supplies expense Dividends Salary expense.. Accumulated depreciation: van. Accumulated depreciation: equipment and music . . . . . .. .. Repair and maintenance expense Travel expense Miscellaneous expense 1,800 12,000 1,200 1,000 75,000 16,000 14,000 2,000 6,000 3,600 . Income before income taxes.. Income taxes payable. Net income . 4,400 137,000 $ 3,800 400 $ 3,400 PARTY WAGON, INC STATEMENT OF RETAINED EARNINGS FOR THE YEAR ENDED DECEMBER 31, 2011 Retained earnings (per adjusted trial balance) Add: Income. .. i.. Less: Income taxes Retained earnings Dec. 31, 2011 ······················ $15,000 3,400 2,000 $16,400 expense . PARTY WAGON, INC. BALANCE SHEET DECEMBER 31, 2011 Assets Cash Supplies Van: . . Less: Depreciation expense: van. . - Equipment and music. Less: Depreciation expense: music and equipment. Total assets $15,000 500 $40,000 8,000 32,000 $35,000 7,000 28,000 $75,500 Liabilities & Stockholders' Equity Liabilities: Notes payable Salaries payable Prepaid rent Unexpired insurance. S 7,000 39,000 1,600 2,000 4,500 $54,100 Stockholders' Equity: Capital stock. 5,000 16,400 $21,400 $75,500 Total stockholders' equity .. .- . . -.*.. Total liabilities and stockholders' equity