Question

1. January 1: Issued 10,000 shares of common stock for $ 50,000.
2. January 1: Acquired a building costing $35,000, paying $5,000 in cash and borrowing the remaining from bank.
3. During the year :acquired inventory costing $40,000 on account from various suppliers.
4. During the year: sold inventory costing $30,000 for 65,000 on account.
5. During the year: paid employees $15,000 as compensation for services rendered during the year.
6. During the year: collected $45,000 from customers related to sales on account.
7. During the year: Paid merchandise suppliers $28,000 related to purchases on account.
8. Dec. 31: Recognized depreciation on the building of $7,000 for financial reporting depreciation expense for income tax purposes was $10,000
9. Dec. 31: Recognized compensation for service rendered during the last week in Dec. but not paid by yearend of $4,000.
10. Dec.31: Recognized and paid interest on the bank loan in part b of $2,400 for the year.
11. Recognized income taxes on the net effect of the preceding transactions at an income tax rate of 40%. Assume that the firm pays cash immediately for any taxes currently due to the government.

Answer 1

Date	General Journal	Debit	Credit
Jan 1	Cash	$       50,000
	Common stock		$      50,000
	(To record Issued 10,000 shares of common stock for $ 50,000.)
Jan 1	Building	$       35,000
	Cash		$        5,000
	Loan Payable		$      30,000
	(To record Acquired a building costing $35,000, paying $5,000 in cash and borrowing the remaining from bank.)
During the year	Inventory	$       40,000
	Account payable		$      40,000
	(To record purchase of inventory on account.)
During the year	Account receivable	$       65,000
	Sales revenue		$      65,000
	(To record sales revenue on account.)
During the year	Cost of goods sold	$       30,000
	Inventory		$      30,000
	(To record cost of goods sold.)
During the year	Salaries expense	$       15,000
	Cash		$      15,000
	(To record salaries expense paid.)
During the year	Cash	$       45,000
	Account receivable		$      45,000
	(To record cash collected from account receivable.)
During the year	Account payable	$       28,000
	Cash		$      28,000
	(To record payment made to account payable.)
Dec 31	Depreciation expense - Building	$         7,000
	Accumulated depreciation - Building		$        7,000
	(To record depreciation expense - Building.)
Dec 31	Salaries expense	$         4,000
	Salaries payable		$        4,000
	(To record salaries expense this paid in future.)
Dec 31	Interest expense	$         2,400
	Interest payable		$        2,400
	(To record accrued interest expense.)
Dec 31	Income tax expense	$         1,440
	Cash		$        1,440
	(To record income tax expense.)

		Financial Reporting	Tax purpose
	Sales	$       65,000	$      65,000
Less:	Cost of Goods sold	$     (30,000)	$    (30,000)
Less:	Salaries expense (15000+4000)	$     (19,000)	$    (19,000)
Less:	Depreciation expense - Building	$       (7,000)	$    (10,000)
Less:	Interest expense	$       (2,400)	$      (2,400)
	Income Before Tax	$         6,600	$        3,600
Multiply: Tax rate		40%	40%
	Tax	$         2,640	$        1,440
Advance Level of accounting for treatment of Tax
Date	General Journal	Debit	Credit
Dec 31	Deferred Tax Expense	$         1,200
	Deferred Tax Liability		$        1,200
	(To record Deferred Tax Expense) (2640-1440)