SMC, Inc. Balance Sheet December 31, 2017 Assets Cash ......................................................................................................... $34,500 Accounts receivable ...................................................................

SMC, Inc. Balance Sheet December 31, 2017
Assets Cash ......................................................................................................... $34,500
Accounts receivable ................................................................................ 25,000
Inventory .................................................................................................. 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 December31,2017
Sales revenue .......................................................................................... $110,000
Rent revenue ........................................................................................... 1,000
Total revenues......................................................................................... $111,000
Less cost of goods sold........................................................................... 60,000
Gross profit ........................................................................................... $ 51,000
Less operating expenses: Supplies expense ............................................................................. $ 400
Salaries expense .............................................................................. 22,000
Miscellaneous expense................................................................... 4,100 26,500
Income beforetaxes................................................................................ $ 24,500
Less income taxes................................................................................... 3,675
Net income............................................................................................... $ 20,825
Earnings per share ( $20,825 / 10,000shares) $ 2.08

SMC, Inc. Post-Closing Trial Balance December 31, 2017
Debits:
Cash ......................................................................................................... $34,500
Accounts Receivable............................................................................... 25,000
Inventory .................................................................................................. 10,000
Supplies ................................................................................................... 200

Credits:
Accounts Payable.................................................................................... $12,000
Salaries Payable ...................................................................................... 1,000
Income TaxesPayable............................................................................. 3,675
Common Stock............................................................................................ 25,000
Retained Earnings ................................................................................... 28,025
Totals........................................................................................................ $69,700 $69,70

a. Issued 10,000 additional shares of common stock for $25,000 cash on January 1st.

b. Borrowed $10,000 on March 1, 2016, from Downtown Bank as a long-term loan. The interest rate on the loan is 5%and Interest for the year is payable on January 1, 2019.

c. Paid $9,000 cash on April1 to lease a building for one year.

d. Received $4,800 on May 1 from a tenant for one year’s rent.

e. Paid $3,600 on June 1 for a one-year insurance policy.

f. Purchased $2,200 of supplies for cash on June 15th.

g. Purchased inventory for $100,000 on account on July 1.

h. August 1, sold inventory for $170,000 on account; cost of the merchandise sold was $90,000.

i. Collected $110,000 cash from customers’ accounts receivable on August 20th.

j. September 1, Paid $85,000 cash for inventories purchased earlier during the year.

k. September 20th paid $31,000 for sales reps’ salaries, including $1,000 owed at the beginning of 2018.

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

m. The income taxes payable for the year of 2017 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 (this is just informational).

o. At year-end, $850 worth of supplies are on hand.

p. At year-end, an additional $6,500 of sales salaries are owed, but have not yet been paid.

q. Prepare an adjusting entry to recognize the taxes owed for 2018. The corporate tax rate is 25% of the income before income taxes.

1. Journalize the transactions for the current year, 2018, using the accounts listed on the financial statements and other appropriate accounts.
2. Set up T-accounts and enter the beginning balances from the December 31, 2017, 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 2018. (Hint: Items b, c, d, e, o, p, and q require adjustment.)
4. After the adjusting entries are posted, prepare an adjusted trial balance, an income statement, statement of retained earnings and a balance sheet for 2018. (Hint: Income before income taxes should equal xxxx). The format of your statements should mirror those prepared by the company in 2017.
5. Journalize and post-closing entries for 2018 and prepare a post-closing trial balance. 6. Compute the Current Ratio and Debt to Total Equity Ratio for 2017 and 2018 7. Interpretive Question: What is your overall assessment of the financial health of SMC, Inc.?

Solutions

Expert Solution

(T accounts and Balance Sheet will be updated soon.)

ekkarill92 answered 1 year ago

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