The trial balance and other information for consulting engineers Mustang Rovers Consulting Limited follow:

Additional information:

1. Service revenue includes fees received in advance from clients of $6,900.

2. Services performed for clients that were not recorded by December 31 totalled $7,300.

3. Bad debt expense for the year is $6,300.

4. Insurance expense includes a premium paid on December 31 in the amount of $6,000 for the period starting on January 1, 2021.

5. Equipment is depreciated on a straight-line basis over 10 years. Residual value is $15,000.

6. Mustang gave the bank a 90-day, 12% note for $7,200 on December 1, 2020.

7. Rent is $750 per month. The rent for 2020 and for January 2021 has been paid.

8. Salaries and wages earned but unpaid at December 31, 2020, are $2,598.

9. Dividends of $80,000 were declared on December 15, 2020 for payment on February 1, 2021.

Instructions

a. From the trial balance and other information given, prepare annual adjusting entries as at December 31, 2020. Round amounts to the nearest dollar.

b. Prepare an adjusted trial balance for Mustang Rovers as at December 31, 2020.

c. Prepare an income statement for 2020, a statement of financial position as at December 31, 2020, and a statement of retained earnings for 2020.

d. Explain how the financial statements in part (c) would change if Mustang Rovers operated as a sole proprietorship, rather than a corporate ownership structure.

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Mustang Rovers Consulting Limited Trial Balance December 31, 2020 Debit Credit $ 83,700 Cash Accounts receivable Allowance for doubtful accounts 81,100 750 Supplies Equipment Accumulated depreciation-equipment Notes payable Common shares 1,960 85,000 6,250 7,200 35,010 161,100 100,000 Retained earnings Service revenue 9,750 Rent expense Salaries and wages expense Insurance expense Utilities expense Miscellaneous expense 28,500 18,500 1,080 720 $310,310 $310,310