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Accounting

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Tunstall, Incorporated, a small service company, keeps its records without the help of an accountant. After much effort, an outside accountant prepared the following unadjusted trial balance as of the end of the annual accounting period on December 31:

Tunstall, Incorporated
Unadjusted Trial Balance
At December 31
Debit Credit
Cash 46,000
Accounts receivable 12,200
Supplies 550
Prepaid insurance 640
Service trucks 17,900
Accumulated depreciation 7,800
Other assets 10,160
Accounts payable 2,390
Wages payable
Income taxes payable
Notes payable (3 years; 10% interest due each September 30) 16,000
Common stock (4,200 shares outstanding) 1,886
Additional paid-in capital 16,974
Retained earnings 5,600
Service revenue 86,350
Wages expense 16,200
Remaining expenses (not detailed; excludes income tax) 33,350
Income tax expense
Totals 137,000 137,000

Data not yet recorded at December 31 included:

  1. The supplies count on December 31 reflected $160 in remaining supplies on hand to be used in the next year.
  2. Insurance expired during the current year, $640.
  3. Depreciation expense for the current year, $3,900.
  4. Wages earned by employees not yet paid on December 31, $600.
  5. Three months of interest expense (for the note payable borrowed on October 1 of the current year) was incurred in the current year.
  6. Income tax expense, $5,880.

Required:

1. Prepare the adjusting entry needed at December 31.

2-a. Prepare an income statement (with Operating Income and Other Items sections) that include the effects of the preceding six transactions.

2-b. Prepare a classified balance sheet that include the effects of the preceding five transactions.

3. Record the closing entry.

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