On December 1, 2012, Bluemound Company had the following account balances.

Debits Credits Cash \($18,200\) Accumulated Depreciation—

Notes Receivable 2,200 Equipment $ 3,000 Accounts Receivable 7,500 Accounts Payable 6,100 Inventory 16,000 Common Stock 20,000 Prepaid Insurance 1,600 Retained Earnings 44,400 Equipment 28,000 $73,500

\($73,500\) During December, the company completed the following transactions.

Dec. 7 Received \($3,600\) cash from customers in payment of account (no discount allowed).

12 Purchased merchandise on account from Klump Co. \($12,000\), terms 1/10, n/30.

17 Sold merchandise on account \($15,000\), terms 2/10, n/30. The cost of the merchandise sold was $10,000.

19 Paid salaries $2,500.

22 Paid Klump Co. in full, less discount.

26 Received collections in full, less discounts, from customers billed on December17.

Adjustment data:1.

Depreciation \($200\) per month.2.

Insurance expired $400.3.

Income tax expense was \($425\). It was unpaid at December31.

Instructions

(a) Journalize the December transactions. (Assume a perpetual inventory system.)

(b) Enter the December 1 balances in the ledger T accounts and post the December transactions.

Use Cost of Goods Sold, Depreciation Expense, Insurance Expense, Salaries and Wages Expense, Sales Revenue, Sales Discounts, Income Taxes Payable, and Income Tax Expense.

(c) The statement from Jackson County Bank on December 31 showed a balance of $21,994.

A comparison of the bank statement with the Cash account revealed the following facts.1.

The bank collected a note receivable of \($2,200\) for Bluemound Company on December15. 2.

The December 31 receipts of \($2,736\) were not included in the bank deposits for December. The company deposited these receipts in a night deposit vault on December31.3.

Checks outstanding on December 31 totaled $1,210.4.

On December 31, the bank statement showed a NSF charge of \($800\) for a check received by the company from L. Shur, a customer, on account.

Prepare a bank reconciliation as of December 31 based on the available information.

(Hint: The cash balance per books is \($22,120\). This can be proven by finding the balance in the Cash account from parts

(a) and (b).)

(d) Journalize the adjusting entries resulting from the bank reconciliation and adjustment data.

(e) Post the adjusting entries to the ledger T accounts.

(f ) Prepare an adjusted trial balance.

(g) Prepare an income statement for December and a classified balance sheet at December31.