Mystic Masters, Inc., provides fortune-telling services over the Internet. In recent years the company has experienced severe financial difficulty. Its accountant prepares adjusting entries on a monthly basis, and closing entries on an annual basis, at December 31. An adjusted trial balance dated December 31, current year, follows. Debits Credits
Cash $ 960
Accounts receivable 300
Unexpired insurance 2,000
Prepaid rent 1,500
Supplies 200
Furniture and fixtures 8,400
Accumulated depreciation:
furniture and fixtures $ 5,200
Accounts payable 6,540
Notes payable 24,000
Salaries payable 1,700
Interest payable 360
Unearned client revenue 200
Capital stock 4,000
Retained earnings 2,600
Client revenue earned 52,000
Insurance expense 6,000
Office rent expense 9,000
Supplies expense 440
Salary expense 48,000
Depreciation expense:
furniture and fixtures 1,400
Office and telephone expense 3,000
Internet service expense 4,900
Legal expense 1,500
Interest expense 4,000
Miscellaneous Expenses 5,000
$96,600 $96,600
Instructions
a. Prepare an income statement and statement of retained earnings for the year ended December 31, 2011. Also prepare the companys balance sheet dated December 31, 2011.
b. Prepare the necessary year-end closing entries.
c. Prepare an after-closing trial balance.
d. Using the financial statements prepared in part a, briefly evaluate the companys performance.
Identify information that the company is apt to disclose in the notes that accompany the financial statements prepared in parta.