Reference no: EM131215669

Prepare a balance sheet, an income statement, and a statement of retained earnings for the year ended May 31, 2015.

Prepare closing entries.

Prepare a post-closing trial balance. The post-closing trial balance should reveal only permanent accounts that remain open for the next accounting period.

Prepare 3 profitability ratios, 3 liquidity ratios, and 2 solvency ratios (be sure to show your calculations).

This company is an American multinational information technology company. In this assignment, you are going to complete the entire accounting cycle for the last month of the physical year ending May 31, 2015:

The company uses the following accounts:

Cash Capital Stock

Accounts Receivable

Inventory Retained Earnings

Prepaid Rent Dividends

Unexpired Insurance Income Summary

Office Supplies Sales

Rental Equipment Salaries Expense

Accumulated Depreciation: Computer Equipment Repair Expense

Cable Expense

Notes Payable Utilities Expense

Accounts Payable Rent Expense

Interest Payable Office Supplies Expense

Salaries Payable Depreciation Expense

Dividends Payable Interest Expense

Unearned Sales

The company performs adjusting entries monthly. Closing entries are performed annually on May 31.

During May, the corporation entered into the following transactions:

May 1: Issued 40,000 shares of capital stock in exchange for a total of $400,000 cash.

May 1: Purchased a piece of equipment to be used in the operations of the business for $300,000 that will assist with a more efficient production. Paid $100,000 cash and issued a two-year note payable for $200,000. The note plus all 24 months of accrued interest are due April 30, 2017. The interest rate on the note is 5%.

May 1: Paid $15,000 to SSR as three months’ advance rent on the warehouse used in daily manufacturing.

May 4: Paid salaries in May totaling $27,000. (Ignore payroll taxes.)

May 8: Purchased office supplies (e.g., copy paper, ink toner, pens, etc.) on account from Office Depot, $4,200. Payment due in 30 days.

May 15: Excluding the Wilmington General advance, fees earned during the first 15 days of May amounted to $95,100, of which $47,000 was received in cash. The remaining amount will be customer purchases on account.

May 18: Purchased on account from Parts Plus, Inc., $1,700 in parts needed to repair a server for a local law firm. (Debit an expense account.) Payment is due in 10 days.

May 23: Collected $22,000 of the accounts receivable recorded on May 15.

May 26: Paid salaries in May totaling $27,000. (Ignore payroll taxes.)

May 27: Paid the account payable to Parts Plus., $1,700.

May 28: Declared a dividend of 10 cents per share, payable on June 15, 2015.

May 29: Paid the May utilities in the amount of $985.

May 31: Purchased a 24-month warranty insurance policy for $24,000. This policy protects the company against liability for defects and warranties for the computer equipment that is sold and leased. The policy goes into effect on June 1, 2015.

May 31: Paid monthly cable bill of 684 to Suddenlink.

May 31: Collected Sales earned during the second half of May, which amounted to $120,700 and of which $86,300 was received in cash. The remaining amount is customer purchases on account.

Data for Adjusting Entries

The advance payment of rent on May 1 covered a period of three months.

The annual interest rate on the note payable is 5 percent.

The machine purchased May 1, 2015 is being depreciated by the straight-line method over a period of five years.

Office supplies on hand at May 31 are estimated at $440.

Employee salaries earned by employees since the last payroll date (May 26) amounted to $9,642 at the month end.