Michael Services, Inc. operates a small snow-removal business during winter. Their services include using a truck-mounted plow to remove snow from driveways and parking lots as well as crews who shovel snow from walkways. Michael operates the truck herself and has several employees who do the hand-shoveling. At the end of November, 2022, Michael general ledger account balances (after Novembers month-end closing entry) were as follows:

November 2022 Trial Balance
Account	Dr.	Cr.
Cash	1,500
Accounts receivable	100
Prepaid insurance	600
Equipment (the truck, blade, and shovels)	50,000
Accounts payable		2,000
Wages payable		200
Notes payable		30,000
Common stock		10,000
Retained earnings		10,000
Services revenue		0
Wages expense	0
Gasoline expense	0
Insurance expense	0
Interest expense	0
Totals	52,200	52,200

During December 2022, Michael had the following transactions:

On December 3, paid employee T. Buckley the $200 that was owed for wages earned during November.

On December 16, the only big snowstorm that happened in December, provided snow removal services and charged customers $3,000. Of that amount, customers paid $1,000 immediately at the time of service, and the remaining $2,000 was on account.

Accounts payable represents the balance of the companys credit card account. Michael paid $500 during December to reduce the credit card balance.

On December 20, paid employees E. Jordan and M. Brooks each $600 (total $1,200) for the work they did during the December 16 snowstorm.

On December 22, paid $130 (in cash) to purchase a tank of gas for the truck.

In addition, the following information was available about Michael accounts as of December 31, 2022:

The $600 balance of prepaid insurance at the end of November represents insurance on the truck covering the months of December and January at a rate of $300 per month.

Interest on the notes payable for the month of December was $250 (10% per year, calculated for one month). Michael did not pay this interest. The companys accounting policy is to add unpaid interest to the balance of the note payable.

Required:

1 Prepare journal entries to account for items (a) through (g) above in the month of December 2022.

2 Post your journal entries to the general ledger (the T-accounts) and update the balances of every account.

3 Enter your updated balances in the before closing columns of the trial balance below:

4 Prepare Michael's income statement in good form for the month of December.

5 Prepare the closing entry(ies) for Decembers activity.

6 Enter the post-closing balances in the rightmost two columns of the trial balance above.

7 Prepare Michael's classified balance sheet as of December 31, 2022.

8 Briefly comment on each of the following questions:

a How do Michaels current assets compare with their current liabilities?

b Was Michaels operation profitable in the month of December?

c What business advice might you offer to Michael given what you see in the financial statements?

d In general, why might a company want to share financial information with people outside the organization?

e What information do people outside the organization want to know about an organizations finances?