Question

In: Accounting

As a recently hired accountant for a small business, SMC, Inc., you are provided with last...

SMC, Inc.

Balance sheet

December 31, 2019

Assets $34,500

Cash $25,000

Accounts receivable $10,000

Supplies $200

Total assets $69,700

Liabilities and stockholders equity

Liabilities:

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.

Income statement

For the year ended December 31, 2019

Sales revenue $110,000

Rent revenue $1,000

Total revenue $111,000

Less cost of goods sold $60,000

Gross profit $51,000

Less operating expense:

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

Earnings per share ($20,825/10,000 shares) $2.08

SMC, Inc.

Post-closing trial balance

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

Common 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, 2020.

A. Issued 10,000 additional shares of common stock for $60,000 cash on January 1st.

B. Borrowed $25,000 on March 1, 2020, from Downtown Bank as a long-term loan. The interest rate on the loan is 4% and interest for the year is payable on January 1, 2021.

C. Paid $12,000 cash on April 1 to lease a building for one year.

D. Received $6,000 on May 1 from a tenant for one years rent.

E. Paid $4,200 on June 1 for a one year Insurance policy.

F. Purchased $3,500 of supplies for cash on June 15th

G. Purchased inventory for $125,000 on account on July 1.

H. August 1, sold inventory for $185,000 on account; cost of the merchandise sold was $120,000.

I. Collected $145,000 cash from customers accounts receivable on August 20th.

J. September 1, paid $95,000 cash for inventories purchased earlier during the year.

K. September 20th paid $34,000 for sales reps salaries, including $1,000 owed at the beginning of 2020.

L. Dividends for $9,500 were paid on October 20th.

M. The income taxes payable for the year of 2019 were paid on November 15th.

N. For adjusting entries, all prepaid expense are initially recorded as assets, and all unearned revenues are initially recorded as liabilities (this is just informational)

O. At year-end, $1,050 worth of supplies are on hand.

P. At year- end, an additional $9,500 of sales salaries are owed, but have not yet been paid.

Q. Prepare and adjusting entry to recognize the taxes owed for 2020. The corporate tax rate is 21% of the income before income taxes.

You are asked to do the following:

Post closing trial balance

Ratio

Solutions

Expert Solution

ekkarill92 answered 1 year ago

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