The adjusted trial balance columns of the work sheet for Mr. Watson Company are as follows.

Instructions

(a) Complete the work sheet by extending the balances to the financial statement columns.

(b) Prepare an income statement, a retained earnings statement, and a classified balance sheet.
$10,000 of the notes payable become due in 2007. No additional issuances of stock occured during 2006.

(c) Prepare the closing entries. Use J 14 for the journal page.

(d) Post the closing entries. Use the three-column form of account. Income Summai \ is account No. 350.

(e) Prepare a post-closing trial balance.

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MR. WATSON COMPANY Work Sheet For the Year Ended December 31, 2006 Adjusted Trial Balance Account No. Account Titles Dr. Cr. 101 Cash 20,800 112 Accounts Receivable 16,200 126 Supplies 2.300 130 Prepaid Insurance 4.400 151 Office Equipment 44,000 152 Accumulated Depreciation-Office Equipment 18,000 200 Notes Payable 20,000 201 Accounts Payable 8.000 212 Salaries Payable 2,600 230 Interest Payable 1,000 311 320 332 Common Stock Retained Earnings Dividends 20.000 16,000 12,000 400 Service Revenue 79.800 610 Advertising Expense 12,000 631 Supplies Expense 3.700 711 Depreciation Expense 6,000 722 Insurance Expense 4,000 726 Salaries Expense 39.000 905 Interest Expense 1.000 Totals 165,400 165,400