Heel-To-Toe-Shoes’ adjusted trial balance on December 31, 2005, follows:

Required 1. Prepare an income statement and a statement of owner’s equity for the year 2005, and a classified balance sheet at December 31, 2005. There are no owner investments in 2005.
2. Enter the adjusted trial balance in the first two columns of a six-column table. Use the middle two columns for closing entry information and the last two columns for a post-closing trial balance. Insert an Income Summary account as the last item in the trial balance.
3. Enter closing entry information in the six-column table and prepare journal entries for them.

Analysis Component 4. Assume for this part only that:

a. None of the $1,100 insurance expense had expired during the year. Instead, assume it is a pre¬ payment of the next period’s insurance protection.

b. There are no earned and unpaid wages at the end of the year.
Describe the financial statement changes that would result from these two assumptions.

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HEEL-TO-TOE SHOES Adjusted Trial Balance December 31, 2005- No. Account Title Debit Credit 101 Cashi $ 13.450 125 Store supplies 4,140 128 Prepaid insurance 2,200 167 Equipment .. 33,000 168 Accumulated depreciation-Equipment $ 9,000 201 Accounts payable 1,000 210 Wages payable 3,200 301 P. Holt, Capital 31,650 302 P. Holt, Withdrawals 16,000 401 Repair fees earned 62,000 612 Depreciation expense-Equipment 3,000 623 Wages expense..... 28.400 637 Insurance expense. 1.100 640 651 690 Rent expense Store supplies expense Utilities expense Totals 2,400 1,300 1,860 $106,850 $106,850