James Ltd.’s statement of financial position at December 31, 2019, is presented below.

During 2020, the following transactions occurred.
1. James paid £2,500 interest on the bonds on January 1, 2020.
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, 2020.
6. The prepaid insurance (£5,600) expired on July 31.
7. On August 1, James paid £12,000 for insurance coverage from August 1, 2020, through July 31, 2021.

8. James paid £24,000 sales taxes to the government.
9. Paid other operating expenses, £91,000.
10. Redeemed the bonds on December 31, 2020, by paying £47,000 plus £2,500 interest.
11. Issued £90,000 of 8% bonds on December 31, 2020, at 104. The bonds pay interest every December 31.

Adjustment data:
1. Recorded the insurance expired from item 7.
2. The equipment was acquired on December 31, 2019, and will be depreciated on a straight-line basis over 5 years with a £3,000 residual value.
3. The income tax rate is 30%.

Instructions
(You may want to set up T-accounts to determine ending balances.)
a. Prepare journal entries for the transactions listed above and adjusting entries.
b. Prepare an adjusted trial balance at December 31, 2020.
c. Prepare an income statement and a retained earnings statement for the year ending December 31, 2020, and a classified statement of financial position as of December 31, 2020.

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James Ltd. Statement of Financial Position December 31, 2019 Share capital-ordinary Retained earnings Bonds payable Accounts payable Interest payable Equipment Prepaid insurance £ 20,000 £ 43,000 5,600 25,750 18,600 50,000 13,750 2,500 Inventory Cash 30,500 £104,850 £104,850