The Flash Pan Company manufactures cooking products. On August 1, 2007, the company borrowed $125,000 from creditors. Semiannual interest payments of $7,500 are to be made to creditors beginning January 31, 2008. On July 1, 2007, the company purchased a 1-year insurance policy for $10,000 and recorded it as prepaid insurance. On January 1, 2007, the company purchased equipment for $50,000. The equipment has an expected life of 4 years. On October 1, 2007, the company rented some of its unused warehouse space to another company. The other company agreed to pay $15,000 for each 6-month period. The first payment would be made on April 1, 2008. Balance sheet and income statement information reported by Flash for the fiscal year ended December 31, 2007 included:

Assets $625,000
Liabilities 250,000
Owner’s Equity 337,500
Revenues 150,000
Expenses 112,500
Net Income 37,500

The balance sheet did not balance but it was distributed anyway. Later, it was discovered that the company’s accounting staff had failed to record any adjusting entries at the end of 2007 for interest, insurance, depreciation, or rent. In addition, no closing entries had been made.

Please help with the following questions.

A. Record the adjusting entries that should have been made at year end 2007.
B. Explain why the balance sheet did not balance and whether this was caused by the failure to record adjusting entries or the failure to record closing entries.
C. Identify the corrected amounts for the balance sheet and income statement. Show work.