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P4-5 Recording Adjusting and Closing Entries and Preparing a Statement of Earnings, Including Earnings per Share, and a Statement of Financial Position (AP4-5) LO4-1, 4-2, 4-4 Sutton Inc., 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 at the end of the company's fiscal year, December 31: Data not yet recorded at December 31 were as follows: a. Supplies inventory on December 31 reflecting $200 remaining on hand to be used in the next year. b. Insurance expired during the current year, $400. c. Depreciation expense for the current year, $4,000. d. Wages earned by employees not yet paid on December 31,$1,100. e. Income tax expense, $7,350. Required: 1. Prepare the adjusting entries at December 31. 2. Show the effects (direction and amount) of the adjusting entries on net earnings and cash. 3. Prepare a statement of earnings for the current year and a statement of financial position at the end of the year, including the effects of transactions (a) through (e). 4. Assume that you forgot to adjust the balance of the service supplies inventory account. How would this error affect the amount of net earnings for the year? Does this error lead to a material effect on net earnings? Explain. 5. Prepare the closing entries at December 31

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