As a recently hired accountant for a small business, SMC, Inc., you are provided with last years balance sheet, income statement, and post-closing trial balance to familiarize yourself with the business.

SMC, Inc. Balance Sheet December 31, 2014

Assets
Cash .........................................................................................................	$34,500
Accounts receivable ................................................................................	25,000
Inventory ..................................................................................................	10,000
Supplies ...................................................................................................	200
Total assets..............................................................................................	$69,700

Liabilities and Stockholders Equity

Liabilities: Accounts payable .............................................................................	$12,000
Salaries payable ...............................................................................	1,000
Income taxes payable ......................................................................	3,675
Total liabilities..........................................................................................	$16,675
Stockholders equity:
Capital stock (10,000 shares outstanding) ....................................	$25,000
Retained earnings ............................................................................	28,025
Total stockholders equity .......................................................................	53,025
Total liabilities and stockholders equity................................................	$69,700

SMC, Inc. Income Statement For the Year Ended December 31, 2014

Sales revenue ..........................................................................................		$110,000
Rent revenue ...........................................................................................		1,000
Total revenues .........................................................................................		$111,000
Less cost of goods sold...........................................................................		60,000
Gross margin ...........................................................................................		$ 51,000
Less operating expenses:
Supplies expense .............................................................................		$ 400
Salaries expense ..............................................................................		22,000
Miscellaneous expense ...................................................................	4,100		26,500
Income before taxes................................................................................		$ 24,500
Less income taxes...................................................................................		3,675
Net income...............................................................................................		$ 20,825

Sales revenue ..........................................................................................		$110,000
Rent revenue ...........................................................................................		1,000
Total revenues .........................................................................................		$111,000
Less cost of goods sold...........................................................................		60,000
Gross margin ...........................................................................................		$ 51,000
Less operating expenses:
Supplies expense .............................................................................		$ 400
Salaries expense ..............................................................................		22,000
Miscellaneous expense ...................................................................	4,100		26,500
Income before taxes................................................................................		$ 24,500
Less income taxes...................................................................................		3,675
Net income...............................................................................................		$ 20,825

SMC, Inc. Post-Closing Trial Balance December 31, 2014

		Debits		Credits
Cash .........................................................................................................		$34,500
Accounts Receivable ...............................................................................		25,000
Inventory ..................................................................................................		10,000
Supplies ...................................................................................................		200
Accounts Payable ....................................................................................				$12,000
Salaries Payable ......................................................................................				$1,000
Income Taxes Payable.............................................................................				$3,675
Common Stock............................................................................................				$25,000
Retained Earnings ...................................................................................				$28,025
Totals........................................................................................................			$69,700	$69,700

You are also given the following information that summarizes the business activity for the current year, 2015

a.Issued 10,000 additional shares of common stock for $35,000 cash on January 1st.

b.Borrowed $10,000 on March 1, 2015, from Downtown Bank as a long-term loan. The interest rate onthe loan is 6% and Interest for the year is payable on January 1, 2016.

c.Paid $4,800 cash on April1 to lease a building for one year.

d.Received $3,000 on May 1 from a tenant for one years rent.

e.Paid $1,800 on June 1 for a one-year insurance policy.

f.Purchased $2,500 of supplies for cash on June 15th.

g.Purchased inventory for $100,000 on account on July 1.

h.August 1, sold inventory for $140,000 on account; cost of the merchandise sold was $75,000.

i.Collected $90,000 cash from customers accounts receivable on August 20th.

j.September 1, Paid $85,000 cash for inventories purchased earlier during the year.

k.September 20th, paid $27,000 for sales reps salaries, including $1,000 owed at the beginning of 2015.

l.Dividends for $6,200 were paid on October 20th.

m.The income taxes payable at the beginning of 2015 were paid on November 15th.

n.For adjusting entries, all prepaid expenses are initially recorded as assets, and all unearned revenues areinitially recorded as liabilities.

o.At year-end, $850 worth of supplies are on hand.

p.At year-end, an additional $7,000 of sales salaries are owed, but have not yet been paid.

q.Prepare an adjusting entry to recognize the taxes owed for 2015. The corporate tax rate is 15% of the incomebefore income taxes.

You are asked to do the following on an excel spreadsheet:

2. Set up T-accounts and enter the beginning balances from the December 31, 2014, post-closing trialbalance for SMC. Post all current year journal entries to the T-accounts.

3.Journalize and post any necessary adjusting entries at the end of 2015. (Hint: Items b, c, d, e, o, p, and qrequire adjustment.)