The adjusted trial balance of Sheila and the Screamers as of December 31, 2008 follows:

The adjusted trial balance of Sheila and the Screamers as of December 31, 2008 follows:

Sheila and The Screamers

Adjusted Trial Balance

December 31, 2008

No. Account Title Debit Credit

101      Cash             $139,200

124     Office supplies    50,000

128     Prepaid Insurance  2,200

167     Equipment         75,000

168     Accumulated depreciation — Equipment     $ 34,000

201     Accounts payable                   43,000

210    Wages payable                      20,000

301   S. Sham, Capital                   129,700

302    S. Sham, Withdrawals 5,000

401    Headbanging revenue                    220,000

612    Depreciation expense — Equipment 11,500

623   Wages expense           125,000

637   Insurance expense     600

640   Rent expense       14,800

650   Legal expense     21,400

690   Fines and damages expense  2,000

_________ _________

Totals $446,700 $446,700

Required

1. Prepare an income statement and a statement of owner’s equity for the year 2008, and a classified balance sheet at December 31, 2008. There are no owner investments in 2008.

2. Enter the adjusted trial balance in the first two columns of a six-column table. Use columns three and four for closing entries and the last two columns for a post-closing trial balance. Insert an Income Summary account as the last item in the trial balance.

3. Enter closing entries in the six-column table and prepare journal entries for them.

4. Assume for this part only that:

a. None of the $600 Insurance expense had expired during the year. Instead, assume it is a prepayment of the next period’s protection.

b. There are no earned and unpaid wages at the end of the year. (Hint: Reverse the $20,000 wages payable accrual.)

Describe the financial statement changes that would result from these assumptions.