Recording Adjusting and Closing Entries and Preparing a Balance Sheet and Income Statement Including Earnings per Share (AP4-7)
Ellis, Inc., a small service company, keeps its records without the help of an accountant. After much effort, an outside accountant prepared the following unadjusted trial balance as of the end of the annual accounting period, December 31, 2011:

Data not yet recorded at December 31, 2011, included:
a. The supplies count on December 31, 2011, reflected $240 remaining supplies on hand to be used in 2012.
b. Insurance expired during 2011, $400.
c. Depreciation expense for 2011, $4,200.
d. Wages earned by employees not yet paid on December 31, 2011, $720.
e. Income tax expense, $5,880.
Required:
1. Record the 2011 adjusting entries.
2. Prepare an income statement and a classified balance sheet that include the effects of the preceding five transactions.
3. Record the 2011 closingentry.

Account Titles Debit Credit $ 46,000 Cash 10,400 Accounts receivable Supplies 640 Prepaid insurance 800 Service trucks 16,000 Accumulated depreciation $ 9,600 8,960 Other assets Accounts payable 2,400 Wages payable Income taxes payable Note payable (3 years: 10% interest due each December 31) 16.000 Contributed capital (5,000 shares outstanding) Retained earnings 20,560 6,000 Service revenue 61,600 Remaining expenses (not detailed; excludes income tax) 33,360 Income tax expense Totals $116,160 $116.160