Using the information provided in P4-6, perform the following steps for Tides Tea Company:

Data from P4-6

Tides Tea Company began operations on January 1, 2018. During the first year of business, the company had the following transactions:
• January 18: The owners invested $200,000 (the par value of the stock) into the business and acquired 40,000 shares of common stock in return.
• February 1: Tides bought factory equipment in the amount of $45,000. The company rook out a long-term note from the bank to finance the purchase.
• February 28: The company paid cash for rent to cover the 12-month period from March 1, 2018, through February 29, 2019, in the amount of $27,000.
• Match 1: Tides purchased supplies in the amount of $28,000 on account.
• March 22: Tides recorded sales revenue in the amount of $120,000. Half of this amount was received in cash and half was paid on account. Ignore cost of goods sold.
• May 1: Tides received cash payments 10 pay off all the customer accounts.
• May 29: The company paid wages of $34,000 in cash.
• July 12: Tides recorded sales revenue in the amount of $180,000, all of which was paid in cash. Ignore cost of goods sold.
• July 31: Tides paid $3,200 cash for interest on the note taken out on February 1.
• August 8: Tides paid off the balance owed to a supplier for the purchase made on March 1.
• September 1: Tides paid $6,000 cash for utilities.
• October 14: Tides paid wages of $24,000 in cash.
• November 10: Tides recorded sales revenue in the amount of $218,000. One payment of $100,000 was received in cash; the remainder of this balance was sold on account. Ignore cost of goods sold.
• December 31: Tides declared and paid a $25,000 dividend.
The chart of accounts used by Tides Tea Company is as follows:

Required
a. Journalize and post adjusting journal entries based on the following additional information (omit explanations):

• At December 31, interest in the amount of $2,600 has accrued on the note payable but has not yet been recorded. This amount will be paid on January 31, 2019.

• The rent payment made on February 28 was for a 12-month lease covering March 1, 2018, 10 February 29, 2019.
• Straight-line depreciation for the full year should be recorded on the equipment purchased on February 1. The equipment has a 15-year life and no residual value.
• A total of $6,000 of supplies remains on band at the end of the year.
• Wage payments in the amount of $62,000 must be accrued at year-end.
• On December 14, Tides received a utilities bill in the amount of $6,200 for the month of November that has not yet been recorded. The amount will be paid in January 2019.
b. Prepare an adjusted trial balance as of December 31.
c. Prepare an income statement, a statement of shareholders' equity, and a balance sheet.

Transcribed Image Text:

Chart of Accounts Group Account Tite Account # 100: Assets 101 Cash 102 Accounts Rece vabe 103 Supp ies Prepaid Rent 104 110 Equipment 112 Acc mulated Deprecation-Equipment 200: Liablit es 201 Accounts Payabe 203 Wages Payab e 2 10 Interest Payabe 220 Noles Payab e Common Stock 300: Equity 301 Retained Earnings 310 Dv dends 320 400: Revenues Sales Revenue 401 500: Expenses 501 Wage Expense 502 Utiit es Expense 503 Rent Expense 504 Administrat ve Expense 505 Insurance Expense 506 Supp ies Expense 510 Depreciation Expense -Equ pment 520 Interest Expense IncomeSummary 600: Olher 601