Spinner Sewing Corporation was incorporated on January 1, 2000. Three investors each invested $150,000 in exchange for $150,000 of common stock of the corporation. The following transactions took place during 2000:

1, Purchased merchandise inventory on account, $200,000.

2, Rent paid on January 2 for a two-year period, $48,000.

3, Borrowed $100,000 on March 31 at a 10% annual interest rate for one year.

4, Sold goods at retail, $300,000; half for cash, half on account. The cost of goods sold was $135,000.

5, Paid $120,000 on outstanding bills owed to inventory suppliers.

6, Received $80,000 from receivables customers.

7, Incurred operating expenses of $36,000, of which $14,000 was paid in cash and the balance on account.

Required

a. Record the above transactions, including the initial investment, in the accounting equation. Set up separate account columns for assets, liabilities, and shareholders’ equity.

b. Record the following year-end accruals (adjust the figures from part a):

1, Expired portion of prepaid rent 2, Accrued interest expense 3, Accrued income tax. Assume 20% tax rate.

c. Prepare a multiple-step income statement for the year ended December 31, 2000.

d. Calculate:

1, Gross profit percentage 2, Operating income percentage 3, Net income percentage

e. Calculate:

1, Return on assets 2, Return on equity

f. Evaluate the performance of the corporation. What other transactions would you typically expect to see?

g. What if the corporation discontinued part of its operations during the year and incurred a loss of $45,000 on the disposal? What impact would this have on the income statement?