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P4-3A The adjusted trial balance of Kobe Repairs on December 31, 2011, follows.

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The adjusted trial balance of Kobe Repairs on December 31, 2011, follows.

KOBE REPAIRS
Adjusted Trial Balance
December 31, 2011

No. Account Title Debit Credit
101 Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 13,000
124 Office supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,200
128 Prepaid insurance . . . . . . . . . . . . . . . . . . . . . . . . . . 1,950
167 Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48,000
168 Accumulated depreciation—Equipment . . . . . . . . $ 4,000
201 Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . 12,000
210 Wages payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . 500
301 S. Kobe, Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,000
302 S. Kobe, Withdrawals . . . . . . . . . . . . . . . . . . . . . . . 15,000
401 Repair fees earned . . . . . . . . . . . . . . . . . . . . . . . . . 77,750
612 Depreciation expense—Equipment . . . . . . . . . . . . 4,000
623 Wages expense . . . . . . . . . . . . . . . . . . . . . . . . . . . 36,500
637 Insurance expense . . . . . . . . . . . . . . . . . . . . . . . . . 700
640 Rent expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,600
650 Office supplies expense . . . . . . . . . . . . . . . . . . . . . 2,600
690 Utilities expense . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,700
Totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $134,250 $134,250

Required
1. Prepare an income statement and a statement of owner’s equity for the year 2011, and a classified balance sheet at December 31, 2011. There are no owner investments in 2011.

2. Enter the adjusted trial balance in the first two columns of a six-column table. Use columns three and four for closing entry information 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 entry information in the six-column table and prepare journal entries for it.
Analysis Component

4. Assume for this part only that
a. None of the $700 insurance expense had expired during the year. Instead, assume it is a prepayment of the next period’s insurance protection.
b. There are no earned and unpaid wages at the end of the year. (Hint: Reverse the $500 wages payable accrual.)

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

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