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.