As a recently hired accountant for a small business, SMC, Inc., you are provided with last year’s balance sheet, income statement, and post closing trial balance to familiarize yourself with the business.
SMC, Inc.
Balance Sheet December31,2014
Assets
Cash ……………………………………………………………………………………………
$34,500
Accounts receivable ……………………………………………………………………..
25,000
Inventory ……………………………………………………………………………………..
10,000
Supplies ………………………………………………………………………………………
200
Total assets………………………………………………………………………………….
$69,700
Liabilities andStockholders’ Equity
Liabilities:
SMC, Inc.
Income Statement
For theYearEndedDecember31,2014
Sales revenue ………………………………………………………………………………
$110,000
Rent revenue ……………………………………………………………………………….
1,000
Total revenues ……………………………………………………………………………..
$111,000
Less cost of goods sold…………………………………………………………………
60,000
Gross margin ……………………………………………………………………………….
$ 51,000
Less operating expenses:
Supplies expense …………………………………………………………………..
$ 400
Salaries expense ……………………………………………………………………
22,000
Miscellaneous expense ………………………………………………………….
4,100
26,500
Income before taxes……………………………………………………………………..
$ 24,500
Less income taxes………………………………………………………………………..
3,675
Net income…………………………………………………………………………………..
$ 20,825
Accounts payable …………………………………………………………………..
$12,000
Salaries payable …………………………………………………………………….
1,000
Income taxes payable …………………………………………………………….
3,675
Total liabilities………………………………………………………………………………
$16,675
Stockholders’equity:
Capital stock (10,000 shares outstanding)………………………………
$25,000
Retained earnings ………………………………………………………………….
28,025
Total stockholders’ equity ……………………………………………………………..
53,025
Total liabilities and stockholders’ equity…………………………………………
$69,700
SMC, Inc.
Post Closing Trial Balance December31,2014
Debits
Credits
Cash ……………………………………………………………………………………………
$34,500
Accounts Receivable …………………………………………………………………….
25,000
Inventory ……………………………………………………………………………………..
10,000
Supplies ………………………………………………………………………………………
200
Accounts Payable …………………………………………………………………………
$12,000
Salaries Payable …………………………………………………………………………..
1,000
Income Taxes Payable…………………………………………………………………..
3,675
Capital Stock………………………………………………………………………………..
25,000
Retained Earnings ………………………………………………………………………..
28,025
Totals…………………………………………………………………………………………..
$69,700
$69,700
You are also given the following information that summarizes the business activity for the current year, 2015
a. Issued 10,000 additional shares of capital stock for $25,000 cash on January 1st.
b. Borrowed $5,000 on March 1, 2015, from Downtown Bank as a long term loan. The interest rate on the loan is 6% and Interest for the year is payable on January 1, 2016.
c. Paid $4,800 cash on April1 to lease a building for one year.
d. Received $2,400 on May 1 from a tenant for one year’s rent.
e. Paid $1,800 on June 1 for a one year insurance policy.
f. Purchased $1,500 of supplies for cash on June 15th.
g. Purchased inventory for $100,000 on account on July 1.
h. August 1, sold inventory for $150,000 on account; cost of the merchandise sold was $80,000.
i. Collected $90,000 cash from customers’ accounts receivable on August 20th.
j. September 1, Paid $70,000 cash for inventories purchased earlier during the year.
k. September 20th, paid $27,000 for sales reps’ salaries, including $1,000 owed at the beginning of 2015.
l. Dividends for $7,500 were paid on October 20th.
m. The income taxes payable at the beginning of 2015 were paid on November 15th.
n. For adjusting entries, all prepaid expenses are initially recorded as assets, and all unearned revenues are initially recorded as liabilities.
o. At year end, $550 worth of supplies are on hand.
p. At year end, an additional $5,000 of sales salaries are owed, but have not yet been paid.
q. Prepare an adjusting entry to recognize the taxes owed for 2015. The corporate tax rate is 15% of the income before income taxes.
Youareaskedtodothefollowingonanexcelspreadsheet:
1. Journalize the transactions for the current year, 2015, using the accounts listed on the financial statements and other appropriate accounts (See the Chart of Accounts Tab on the Excel Spreadsheet).
2. Set up T accounts and enter the beginning balances from the December 31, 2014, post closing trial balance for SMC. Post all current year journal entries to the T accounts.
3. Journalize and post any necessary adjusting entries at the end of 2015. (Hint: Itemsb, c,d,e,o,p, and q require adjustment.) Post the adjusting entries to your T accounts.
4. After the adjusting entries are posted, prepare an adjusted trial balance, an income statement,
statement of retained earnings and a balance sheet for 2015. (Hint:Incomebeforeincometaxes shouldequal$34,550)
5. Journalize and post closing entries for 2015 and prepare a po
+1(438) 230-5325
support@ibeehomeworksolutions.com
