Question

The following list summarizes the transactions that took place during a start up’s second year of operations. Using the information below (and assuming FIFO for inventory), prepare a list of the appropriate journal entries, including any necessary adjusting entries, and create a Balance Sheet and Income Statement. Once you have created the financial statements, provide the appropriate closing entries. Recall that there were 280 units of inventory left at the end of Year One. While the company uses FIFO for internal reporting purposes, it reports Inventory under LIFO for financial statement purposes ($2400). Therefore, you will need to calculate what the LIFO reserve adjustment would be in Year Two and provide the necessary adjusting entry.

To summarize:

- Create journal entries and adjusting entries

- Create a Balance Sheet and Income Statement

- Create Closing Entries

Transactions and information for the year:

a. Jan 2nd, ordered and received 200 units of inventory purchased on account for $14 each

b. Jan 15th, paid $3,400 of accounts payable.

c. Feb 3rd, ordered and received 100 units of inventory purchased on account for $16 each

d. Feb 22nd, sold 250 units of inventory at $55 each on account.

e. March 1 st, incurred $900 of wages expense

f. Mar 30th, collected $5000 of accounts receivable

g. April 1 st, paid $700 of wages payable

h. May 2nd, Paid $1000 of accounts payable

i. June 1 st, Paid $196 of taxes payable

j. June 30th, made first interest payment on Note Payable.

k. Oct 12th, sold 100 units of inventory at $56 each.

l. Dec 31st, spent $5000 at end of year to repair PPE ($1500) and to improve PPE ($3500). Revised useful life is 5 more years. Since the improvements occurred at the end of Year Two, the revised depreciation scheme will only apply to Year Three.

m. Estimated that 5% of Year 2 sales on account would not be collected.

n. Estimated tax rate is 35%

Answer 1

Event	Accounst title	DR	cR
a)	Inventory	$2,800
Jan-02	Accounts payable		$2,800
	(200*14)
b	Accounts payable	$3,400
Jan-15	Cash		$3,400
c
Feb-03	Inventory	$1,600
	Accounts payable		$1,600
	(100*16)
d
Feb-22	Accounts Receivable	$13,750
	Sales		$13,750
	Cost of good sold (250*beginning inventory per unit cost)
	Inventory
e	Wages expenses	900
Mar-01	Wages payable		$900
f	Cash	$5,000
Mar-03	Accounts Receivable		$5,000
g	Wages payable	700
Apr-01	Cash		$700
h	Accounts payable	$1,000
May-02	Cash		$1,000
i.	Taxes payable	196
	Cash		196
j	Interest expenses
Jun-30	Cash (Notes payable amount*Interest rate*no. of months/12)
k	Accounts Receivable	$5,600
Oct-12	Sales		$5,600
	Cost of good sold (30 units from beg inventory*rate)+(70*14)
	Inventory
l	Repair & maintenece expenses	$1,500
Dec-31	PPE	3500
	Cash		5000
m	Bad debt expenses	968
	Allowance for Doubtful accounts (13750+5600)*5%		968
n	Income tax expenses
	Income tax payable
	(sales-cost of good sold-other expenses)*35%
As begiining inventory rate not mentioned hence COGS is not calculated, plz enter it in the formula)
With the given information journal entries can be created did the same
If any doubt pleas comment