Question

Use the following financial statements and additional information.

QUALITY FIRST INC. Comparative Balance Sheets June 30, 2019 and 2018
	2019				2018
Assets
Cash	$	120,200			$	72,800
Accounts receivable, net		76,000				59,000
Inventory		68,000				94,000
Prepaid expenses		4,600				5,800
Total current assets		268,800				231,600
Equipment		137,000				127,000
Accum. depreciation—Equipment		(33,000	)			(11,000	)
Total assets	$	372,800			$	347,600
Liabilities and Equity
Accounts payable	$	31,000			$	38,000
Wages payable		8,000				19,000
Income taxes payable		4,100				4,600
Total current liabilities		43,100				61,600
Notes payable (long term)		40,000				80,000
Total liabilities		83,100				141,600
Equity
Common stock, $5 par value		240,000				170,000
Retained earnings		49,700				36,000
Total liabilities and equity	$	372,800			$	347,600

QUALITY FIRST INC. Income Statement For Year Ended June 30, 2019
Sales				$	727,000
Cost of goods sold					445,000
Gross profit					282,000
Operating expenses
Depreciation expense	$	63,000
Other expenses		71,000
Total operating expenses					134,000
					148,000
Other gains (losses)
Gain on sale of equipment					2,400
Income before taxes					150,400
Income taxes expense					46,040
Net income				$	104,360

Additional Information

1. A $40,000 note payable is retired at its $40,000 carrying (book) value in exchange for cash.
2. The only changes affecting retained earnings are net income and cash dividends paid.
3. New equipment is acquired for $62,000 cash.
4. Received cash for the sale of equipment that had cost $52,000, yielding a $2,400 gain.
5. Prepaid Expenses and Wages Payable relate to Other Expenses on the income statement.
6. All purchases and sales of inventory are on credit.

5. Reconstruct the journal entry for the sale of equipment at a gain, incorporating the change in the related balance sheet account(s), if any.

6. Reconstruct the journal entry for income taxes expense, incorporating the change in the related balance sheet account(s), if any.

7. Reconstruct the entry to record the retirement of the $40,000 note payable at its $40,000 carrying (book) value in exchange for cash.

8. Reconstruct the entry for the purchase of new equipment.

9. Reconstruct the entry for the issuance of common stock.

10. Close all revenue and gain accounts to income summary.

11. Close all expense accounts to income summary.

12. Close Income Summary to Retained Earnings.

13. Reconstruct the journal entry for cash dividends paid.

1	Jun 30	Cash	710,000
		Accounts receivable, net	17,000
		Sales		727,000
2	Jun 30	Cost of goods sold	445,000
		Accounts payable	7,000
		Inventory		26,000
		Cash		426,000
3	Jun 30	Depreciation expense	63,000
		Accumulated depreciation - Equipment		63,000
4	Jun 30	Other expenses	71,000
		Wages payable	11,000
		Prepaid expenses		1,200
		Cash		80,800
5	Jun 30	Cash
		Accumulated depreciation - Equipment
		Equipment
		Gain on sale of equipment
6	Jun 30	Income taxes expense
		Income taxes payable
		Cash
7	Jun 30	Notes payable (long-term)
		Cash
8	Jun 30	Equipment
		Cash
9	Jun 30	Cash
		Common stock, $5 par value
10	Jun 30	Sales
		Gain on sale of equipment
11	Jun 30	Income summary
		Cost of goods sold
		Depreciation expense
		Other expenses
		Income taxes expense
12	Jun 30	Income summary
		Retained earnings
13	Jun 30	Retained earnings
		Cash

Answer 1

Note. each entry is separately prepared, supporting its ledger accounts.

You can have entries first and followed by accounts.