Penny Proud began operations as a private investigator on January 1, 2003. The trial balance columns of the work sheet for Proud P.I. at March 31 are as follows.

Accounts Titles Debit Credit

Cash 11,400

Accounts Receivable 5,620

Supplies 1,050

Prepaid Insurance 2,400

Equipment 30,000

Notes Payable 10,000

Accounts Payable 12,350

P. Proud, Capital 20,000

P. Proud, Drawing 600

Service Revenue 13,620

Salaries Expense 2,200

Travel Expense 1,300

Rent Expense 1,200

Miscellaneous Expense 200 ______

TOTAL 55,970 55,970

OTHER DATA:

1. Supplies on hand total $750
2. Depreciation is $500 per quarter.
3. Interest accrued on 6-month note payable, issued January 1, $300.
4. Insurance expires at the rate of $150 per month
5. Services provided but unbilled at March 31 total $750.

INSTRUCTIONS:

1. Complete the work sheet.
2. Prepare an income statement and owners equity statement for the quarter and a classified balance sheet at March 31. P. Proud did not make any additional investments in the business during the quarter ended March 31, 2003.
3. Journalize the adjusting entries from the adjustments columns of the work sheet
4. Journalize the closing entries from the financial statement columns of the work sheet.

CHART OF ACCOUNTS

CASH NOTES PAYABLE TRAVEL EXPENSE

ACCOUNTS RECEIVABLE INTEREST PAYABLE RENT EXPENSE

PREPAID INSURANCE PENNY PROUD, CAPITAL MISC. EXPENSE

SUPPLIES PENNY PROUD, DRAWING INTEREST EXPENSE

EQUIPMENT SERVICE REVENUE DEPRECIATION EXPENSE

ACCUM.DEPRE.- EQUIPMT SALARIES EXPENSE INSURANCE EXPENSE

ACCOUNTS PAYABLE SUPPLIES EXPENSE