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. Jacks 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.

Required:

a. Prepare a corrected set of financial statements dated December 31, current year. (You may assume that all of the figures in the companys 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.

PARTY WAGON, INC Income Statement For the Year Ended December 31, current year Revenue: Party revenue earned Unearned party revenue Accounts receivable Total revenue $ 156,000 2,160 10,800 $ 168,960 Expenses: Insurance expense Office rent expense Supplies expense Dividends Salary expense Accumulated depreciation: van Accumulated depreciation: equipment and music Repair and maintenance expense Travel expense Miscellaneous expense Interest expense $ 2,160 14,400 1,440 1,200 90,000 19,200 16,800 2,400 7,200 4,320 5,280 Income before income taxes Income taxes payable Net income 164,400 $4,560 480 $ 4,080 PARTY WAGON, INC Statement of Retained Earnings For the Year Ended December 31, current year Retained earnings (per adjusted trial balance) Add: Income Less: Income taxes expense $18,000 4,080 2,400 $19,680 Retained earnings Dec. 31, current year