Party Wagon, Inc., provides musical entertainment at weddings, dances, and various other functions. The company performs adjusting entries monthly, but prepares closing entries annually on December 31. The company recently hired Jack Armstrong as its new accountant. Jack's first assignment was to prepare an income statement, a statement of retained earnings, and a balance sheet using an adjusted trial balance given to him by his predecessor, dated December 31, current year. From the adjusted trial balance, Jack prepared the following set of financial statements. Revenue: PARTY WAGON, INC. Income Statement For the Year Ended December 31, Current Year Party revenue earned Unearned party revenue Accounts receivable Total revenue Expenses: Insurance expense $ 156,000 2,160 10,800 $ 168,960 $ 2,160 Office rent expense 14,400 Supplies expense 1,440 Dividends 1,200 Salary expense 90,000 Accumulated depreciation: van 19,200 Accumulated depreciation: equipment and music 16,800 Repair and maintenance expense 2,400 Miscellaneous expense Travel expense Interest expense Income before income taxes Income taxes payable Net income 7,200 4,320 5,280 164,400 4,560 480 $ 4,080 Statement or etained earnings For the Year Ended December 31, Current Year Retained earnings (per adjusted trial balance) Add: Income Less: Income taxes expense Retained earnings Dec. 31, current year Cash Supplies Van PARTY WAGON, INC. Balance Sheet December 31, Current Year Assets $18,000 4,080 2,400 $19,680 $18,000 600 Less: Depreciation expense: van Equipment and music Less: Depreciation expense: music and equipment Total assets Liabilities: Accounts payable Notes payable Salaries payable Prepaid rent Unexpired insurance Total liabilities Stockholders' equity: Capital stock Retained earnings Liabilities & Stockholders' equity Total stockholders' equity Total liabilities and stockholders' equity Required: $48,000 9,600 $ 42,000 8,400 38,400 33,600 $90,600 $ 8,400 46,800 1,920 2,400 5,400 $64,920 6,000 19,688 $25,680 $90,600) a. Prepare a corrected set of financial statements dated December 31, current year. (You may assume that all of the figures in the company's adjusted trial balance were reported correctly except for Interest Payable of $240, which was mistakenly omitted in the financial statements prepared by Jack.) b. Prepare the necessary year-end closing entries. c. Using the financial statements prepared in part a, briefly evaluate the company's profitability and liquidity. (No transactions affected the capital stock account during the vear.)