Accounting Cycle Review 11-01 a,b, c1-c3 Morgan Company's balance sheet at December 31, 2019, is presented below. Cash Inventory Prepaid Insurance Equipment MORGAN COMPANY Balance Sheet December 31, 2019 $30,500 Accounts Payable 30,250 Interest Payable 5,748 Notes Payable 38,340 Owner's Capital $104,838 $13,250 298 59,500 31,790 $104,838 During January 2020, the following transactions occurred. (Morgan Company uses the perpetual inventory system.) 1. Morgan paid $298 interest on the note payable on January 1, 2020. The note is due December 31, 2021. 2. Morgan purchased $241,000 of inventory on account. 3. Morgan sold for $491,000 cash, inventory which cost $262,000. Morgan also collected $31,915 in sales taxes. 4. Morgan paid $229,000 in accounts payable. 5. Morgan paid $15,000 in sales taxes to the state. 6. Paid other operating expenses of $19,500. 7. On January 31, 2020, the payroll for the month consists of salaries and wages of $62,000. All salaries and wages are subject to 7.65% FICA taxes. A total of $8,800 federal income taxes are withheld. The salaries and wages are paid on February 1. Adjustment data: 8. Interest expense of $298 has been incurred on the notes payable. 9. The insurance for the year 2020 was prepaid on December 31, 2019. 10. The equipment was acquired on December 31, 2019, and will be depreciated on a straight-line basis over 5 years with a $2,700 salvage value. 11. Employer's payroll taxes include 7.65% FICA taxes, a 5.4% state unemployment tax, and an 0.8% federal unemployment tax. No. Account Titles and Explanation Debit Credit 1. (To record sales revenue.) (To record cost of goods sold.)