Financial & Managerial Accounting 17th Edition by Jan Williams ,Susan Haka,Mark Bettner,Joseph Carcello

تمرين 50

Correcting Classification Errors
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, 2015.
From the adjusted trial balance, Jack prepared the following set of financial statements:

Instructions
a. Prepare a corrected set of financial statements dated December 31, 2015. (You may assume that all of the figures in the company's adjusted trial balance were reported correctly except for Interest Payable of $200, 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.