Reference no: EM131264124
As a recently hired accountant for a small business, SMC, Inc., you are provided with last year’s balance sheet, income statement, and post-closing trial balance to familiarize yourself with the business.
SMC,Inc.
Balance Sheet December 31, 2015
Assets
Cash .........................................................................................................
$34,500
Accounts receivable ................................................................................
25,000
Inventory ..................................................................................................
10,000
Supplies ...................................................................................................
200
Total assets..............................................................................................
$69,700
Liabilities and Stockholders’Equity
Liabilities:
SMC,Inc.
IncomeStatement
For theYearEndedDecember31,2015
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 / 10,000 shares) $ 2.08
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.
Post-Closing TrialBalance December 31, 2015
Debits
Credits
Cash .........................................................................................................
$34,500
Accounts Receivable ...............................................................................
25,000
Inventory ..................................................................................................
10,000
Supplies ...................................................................................................
Accounts Payable ....................................................................................
200
$12,000
Salaries Payable ......................................................................................
1,000
Income TaxesPayable.............................................................................
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, 2016
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 onthe loan is 5% and Interest for the year is payable on January 1, 2017.
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 2016.
l. Dividends for $9,500 were paid on October 20th.
m. The income taxes payable at the beginning of 2016 were paid on November 15th.
n. For adjusting entries, all prepaid expenses are initially recorded as assets, and all unearned revenues areinitially 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 2015. The corporate tax rate is 25% of theincome before income taxes.
Question:
Journalize and post-closing entries for 2016 and prepare a post-closing trial balance.
Weygandt, Financial & Managerial Accounting, 2e