Reference no: EM131568879

Question - James Corporation's balance sheet at December 31, 2014, is presented below.

JAMES CORPORATION Balance Sheet December 31, 2014

Cash $30,500 Accounts Payable $13,750

Inventory $25,750 Bonds Payable $50,000

Prepaid Insurance $5,600 Common Stock $20,000

Equipment $43,000 Retained Earnings $18,600

104,850 $104,850

During 2015, the following transactions occurred.

1. James paid $2,500 interest on the bonds on January 1, 2015.

2. James purchased $241,100 of inventory on account.

3. James sold for $450,000 cash inventory which cost $250,000. James also collected $31,500 sales taxes.

4. James paid $230,000 on accounts payable.

5. James paid $2,500 interest on the bonds on July 1, 2015.

6. The prepaid insurance ($5,600) expired on July 31.

7. On August 1, James paid $12,000 for insurance coverage from August 1, 2015, through July 31, 2016.

8. James paid $24,000 sales taxes to the state.

9. Paid other operating expenses, $91,000.

10. Retired the bonds on December 31, 2015, by paying $47,000 plus $2,500 interest.

11. Issued $90,000 of 8% bonds on December 31, 2015, at 104. The bonds pay interest every June 30 and December 31.

Adjustment data:

1. Recorded the insurance expired from item 7.

2. The equipment was acquired on December 31, 2014, and will be depreciated on a straight-line basis over 5 years with a $3,000 salvage value.

3. The income tax rate is 30%. (Hint: Prepare the income statement up to income before taxes and multiply by 30% to compute the amount.)

Instructions - (You may want to set up T-accounts to determine ending balances.)

(a) Journal entries for the transactions listed above and adjusting entries.

(b) Adjusted trial balance at December 31, 2015.

(c) Income statement and a retained earnings statement for the year ending December 31, 2015, and a classified balance sheet as of December 31, 2015.