ADJUSTING ENTRY AND PREPARATION OF FINANCIAL STATEMENTS.

Michael’s Hardware has the following unadjusted trial balance at the end of 19x3:

The following data are also available for preparation of adjusting entries:

a) One month’s insurance ($250) remains prepaid at December 31, 19x3.

b) The building had an expected life of 10 years and an expected residual value of $25,000 when purchased.

c) Six months’ interest at 10% is unpaid and unrecorded on the note payable at yearend.

d) Based on a physical inventory, the appropriate ending balance for merchandise inventory is $74,400.

e) The income tax rate is 30%.
REQUIRED:
1. Prepare adjusting entries for 19x3.
2. Prepare an income statement, a statement of changes in retained earnings, and a balance sheet using adjusted account balances. lol

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ACCOUNT Cash. Accounts receivable Prepaid insurance Inventory MICHAEL'S HARDWARE Unadjusted Trial Balance As of December 31, 19x3 DEBIT $ 9,600 42,700 2,000 81,500 CREDIT Building 172,000 Accumulated depreciation, building $ 73,500 Land 20,000 Other assets 6,400 Accounts payable 18,700 Notes payable (due in 19x9, 10%) 24,000 Capital stock 132,000 Dividends 4,000 Retained earnings, 12/31/x2 37,600 Sales revenue 215,000 Sales returns 11,500 Purchases 109,000 Purchase returns 7,100 Transportation-in 3,100 Operating expenses (not detailed) 42,000 Insurance expense 2,800 Interest expense 1,300 Totals $507,900 $507,900