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, current year.

From the adjusted trial balance, Jack prepared the following set of financial statements.

PARTY WAGON, INC.
STATEMENT OF RETAINED EARNINGS
FOR THE YEAR ENDED DECEMBER 31, CURRENT YEAR
Retained earnings (per adjusted trial balance).................................$18,000
Add: Income ..........................................................................4,080
Less: Income taxes expense ........................................................ 2,400
Retained earnings Dec. 31, current year .......................................$19,680

Instructions
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.
c. Using the financial statements prepared in part a, briefly evaluate the company's profitability and liquidity. (No transactions affected the capital stock account during the year.)

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PARTY WAGON, INC. INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, CURRENT YEAR Revenue $156,000 2,160 10,800 $168,960 Expenses: Insurance expense Office rent expense Supples expense. $ 2,160 14,400 1,200 Salary expense.. Accumulated depreciation: van... 90,000 Travel expense Interest expense $4,560 480 $ 4,080 Income taxes payable PARTY WAGON, INC. BALANCE SHEET DECEMBER 31, CURRENT YEAR Assets $18,000 600 38,400 33,600 $90,600 Llabllltles&Stockholders' Equity Llabllltles: 串8,400 46,800 1,920 2,400 5,400 $64,920 Notes payable Stockholders' Equty: 6,000 19,680 $25,680 $90,600