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SMC, Inc. Balance Sheet December 31, 2018 Assets Cash ... $34,500 Accounts receivable .25,000 Inventory ..10,000...

SMC, Inc. Balance Sheet December 31, 2018

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 December31,2018

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 before taxes.. $ 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, 2018 Debits Credits

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, 2019

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

b. Borrowed $10,000 on March 1, 2019, 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, 2020.

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. August1, 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 2018 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 2019. The corporate tax rate is 25% of the income before income taxes.

Set up T-accounts and enter the beginning balances from the December 31, 2018, post-closing trial balance for SMC. Post all current year journal entries to the T-accounts.

Expert Solution

Cash	Debit	25,000.00
Common Stoch	Credit	25,000.00
Cash	Debit	10,000.00
Long Term loan	Credit	10,000.00
Building on lease	Debit	9,000.00
Cash	Credit	9,000.00
Cash	Debit	4,800.00
Unearned Revenue	Credit	4,800.00
Prepaid Insurance	Debit	3,600.00
Cash	Credit	3,600.00
Supplies	Debit	2,200.00
Cash	Credit	2,200.00
Inventory	Debit	100,000.00
Accounts payable	Credit	100,000.00
Accounts Receivable	Debit	170,000.00
Sales	Credit	170,000.00
Cash	Debit	110,000.00
Accounts Receivable	Credit	110,000.00
Accounts payable	Debit	85,000.00
Cash	Credit	85,000.00
Salary	Debit	30,000.00
Salary Payable	Debit	1,000.00
cash	Credit	31,000.00
Dividends	Debit	9,500.00
Cash	Credit	9,500.00
Income Tax Payable	Debit	3,675.00
Cash	Credit	3,675.00
Salary	Debit	6,500.00
Salary Payable	Credit	6,500.00

T-Accounts Uploaded as image

Balance Sheet

Asset	$	Liabilities and Stockholders’ Equity	$
Cash	40,325	Accounts Payable	35,000
Accounts Receivable	85,000	Salaries Payable	6,500
Building on Lease	1,250	Unearned Revenue	1,600
Inventory	20,000	Income Tax payable	8,971
Supplies	850	Long Term loan	10,000
Prepaid Insurance	1,500	Interest on Loan Payable	417
		Capital Stock	50,000
		Retained Earning	45,437

ekkarill92 answered 1 year ago

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 .............................................................................................

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