P3-7AOnline Security Buddies provides consulting services to small businesses that require computer security but are too small to have their own IT person on staff. The business had the following account balances:

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The following transactions occurred during December:

1. On December 1, paid $11,500 cash to an advertising firm for four months of advertising work in advance.
2. On December 6, supplies in the amount of $3,700 were purchased on account.
3. On December 15, the company received a cash advance of $8,000 for work to be performed starting January 1, 2021.
4. On December 29, the company provided counselling services to a customer for $15,000, to be paid in 30 days.

The following information was available on December 31, 2020:

1. A physical count shows $7,600 of supplies remaining on hand on December 31.
2. The server equipment has an expected useful life of eight years with no expected value after eight years. The server equipment was purchased on January 2, and the straight-line method of amortization is used.
3. The computer equipment, purchased on January 2, is expected to be used for four years with no expected value after four years. The straight-line method of amortization is used.
4. The advertising firm has performed one-quarter of the work on the contract.
5. The company's senior consultant, who earns $800 per day, worked the last six days of the year and will be paid on January 4, 2018.

Required

1. Journalize the entries. Add new accounts if necessary.
2. Prepare an adjusted trial balance on December 31, 2020. List expenses in the order of dollar amount, from the greatest amount to the smallest.
3. Prepare an income statement for the year ended December 31, 2020. List expenses in the order of dollar amount, from the greatest amount to the smallest.
4. Prepare a statement of owner's equity for the year ended December 31, 2020. Assume there have been no changes to the capital account since January 1.
5. Prepare a balance sheet at December 31, 2020.

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Prepare adjusting entries, an adjusted trial balance, and financial statements

Net income, $158,075