Reference no: EM132314824

Miller Corporation - Year 20X1

You have decided to go into the business of selling Motorcycles. You have incorporated your business under the name of Miller Corporation

On January 1, 20X1, you begin by depositing $50,000 cash in the new corporate bank account - $30,000 of the money is yours and $20,000 is borrowed from your Uncle Mike. For the $30,000, which is yours, you (as Miller Corporation) issue yourself 300 shares of common stock. For the $20,000 borrowed from your uncle, you sign a note agreeing to pay back that amount on December 31, 20X3 and promise to pay interest of 8% at the end of each year. In addition to the cash you invested on January 1st, you also invested a piece of land that you own into the business on August 1st that is worth $60,000 in exchange for 600 more shares of stock.

On January 1, 20X1, you bought 20 Motorcycles for $4,000 each. During the year, you sold 16 Motorcycles for $8,500 each.

You also paid a security deposit of $2,000 (when you rented your office space); advertising expense of $6,000; 12 months' rent of $24,000; utilities of $4,000; and Supplies of $2,000. You pay the first year's interest to Uncle Mike on December 31, 20X1.

Your tax rate is 21% of your income before taxes and you pay 50% of these taxes.

Prepare the Journal Entries (including the closing entry), T-accounts, and all four Financial Statements (in good form).

Miller Corporation - Year 20X2

During the second year, you bought 24 Motorcycles and sold 26, same cost and retail prices as the first year, but you have arranged terms with your supplier that allow you to pay 25% of the purchase price in cash and the rest in one year. Because of your new financing arrangement with your vendor, you now sell Motorcycles for 60% down and the rest will be paid for by your customers next year.

You paid the same rent. You paid office expenses of $8,000. You also paid $3,000 for advertising in The Post; utilities of $6,000; and Supplies of $1,000. You paid the interest to Mike on December 31st. You hired a worker whom you paid $15,000 (includes amount owed from prior year). You owe your employee $2,000 more in wages at the end of the year.

On February 1st, you issued 50 shares of common stock for $5,000. At the end of the year, you paid a dividend of $1,000.

Tax rate is the same (21% of taxable income). Paid 20X1 taxes. You will pay 20X2 taxes next year.

Prepare the Journal Entries (including the closing entry), T-accounts, and all four Financial Statements (in good form).