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 You are also given the following information that summarizes the business activity for the current year,2019 a Issued 10,000 additional shares of common stock for $45,000 cash on January 1st b Borrowed $15,000 on February 1, 2019, from Downtown Bank as a long term loan The interest rate on the loan is 6 and Interest for the year is payable on January 1, 2020 c Paid $9,000 cash on March 1 to lease a building for one year d Received $4,800 on April 1 from a tenant for one years rent e Paid $3,600 on May 1 for a one year insurance policy f Purchased $2,700 of supplies for cash on June 15th g Purchased inventory for $100,000 on account on July 1 h August 1, sold inventory for $155,000 on account cost of the merchandise sold was $85,000 i Collected $125,000 cash from customers accounts receivable on August 20th j September 1, Paid $90,000 cash for inventories purchased earlier during the year k September 20th paid $32,000 for sales reps salaries, including $1,000 owed at the beginning of 2019 l Dividends for $7,500 were paid on October 20th m The income taxes payable for the year of 2018 were paid on November 15th n For adjusting entries, all prepaid expenses are initially recorded as assets, and all unearned revenues are initially recorded as liabilities (this is just informational) o At year end, $850 worth of supplies are on hand p At year end, an additional $9,500 of sales salaries are owed, but have not yet been paid q Prepare an adjusting entry to recognize the taxes owed for 2019 The corporate tax rate is 21 of the income before income taxes Assignment Summary On a spreadsheet, perform the following tasks using the information from SMC, Inc provided above Journalize the transactions for the current year, 2019, using the accounts listed on the chart of account (Listed on the first tab of the excel spreadsheet provided) Set up T accounts and enter the beginning balances from the December 31, 2018, post closing trial balance for SMC Post all current year journal entries to the T accounts Journalize and post any necessary adjusting entries at the end of 2019 ( Hint Items b, c, d, e, o, p, and q require adjustment ) After the adjusting entries are posted, prepare the following an adjusted trial balance, an income statement, statement of retained earnings, and a balance sheet for 2019 The format of your statements should mirror those prepared by the company in 2018 Journalize and post closing entries for 2019 and prepare a post closing trial balance Compute the Current Ratio and Debt to Total Equity Ratio for 2018 and 2019 Interpretive Question What is your overall assessment of the financial health of SMC, Inc Balance Sheet 2018 SMC, Inc Balance Sheet December 31, 2018 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 December31,2018 Sales revenue $110,000 Rent revenue 1,000 Total revenues $111,000 Less cost of goods sold 60,000 Gross profit $ 51,000 Less operating expenses Supplies expense $ 400 Salaries expense 22,000 Miscellaneous expense 4,100 26,500 Income beforetaxes $ 24,500 Less income taxes 3,675 Net income $ 20,825 Earnings per share ( $20,825 10,000shares) $ 2 08 SMC, Inc Post Closing Trial Balance December 31, 2018 Debits Credits Cash $34,500 Accounts Receivable 25,000 Inventory 10,000 Supplies Accounts Payable 200 $12,000 Salaries Payable 1,000 Income TaxesPayable 3,675 Common Stock 25,000 Retained Earnings 28,025 Totals $69,700 $69,700

The Answer is in the image, click to view ...

Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Aug 27, 2024

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

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.

You are also given the following information that summarizes the business activity for the current year,2019

a.	Issued 10,000 additional shares of common stock for $45,000 cash on January 1st.
b.	Borrowed $15,000 on February 1, 2019, from Downtown Bank as a long-term loan. The interest rate on the loan is 6% and Interest for the year is payable on January 1, 2020.
c.	Paid $9,000 cash on March 1 to lease a building for one year.
d.	Received $4,800 on April 1 from a tenant for one years rent.
e.	Paid $3,600 on May 1 for a one-year insurance policy.
f.	Purchased $2,700 of supplies for cash on June 15th.
g.	Purchased inventory for $100,000 on account on July 1.
h.	August 1, sold inventory for $155,000 on account; cost of the merchandise sold was $85,000.
i.	Collected $125,000 cash from customers accounts receivable on August 20th.
j.	September 1, Paid $90,000 cash for inventories purchased earlier during the year.
k.	September 20th paid $32,000 for sales reps salaries, including $1,000 owed at the beginning of 2019.
l.	Dividends for $7,500 were paid on October 20th.
m.	The income taxes payable for the year of 2018 were paid on November 15th.
n.	For adjusting entries, all prepaid expenses are initially recorded as assets, and all unearned revenues are initially recorded as liabilities (this is just informational).
o.	At year-end, $850 worth of supplies are on hand.
p.	At year-end, an additional $9,500 of sales salaries are owed, but have not yet been paid.
q.	Prepare an adjusting entry to recognize the taxes owed for 2019. The corporate tax rate is 21% of the income before income taxes.

Assignment Summary

On a spreadsheet, perform the following tasks using the information from SMC, Inc. provided above:

Journalize the transactions for the current year, 2019, using the accounts listed on the chart of account (Listed on the first tab of the excel spreadsheet provided).
Set up T-accounts and enter the beginning balances from the December 31, 2018, post-closing trial balance for SMC. Post all current year journal entries to the T-accounts.
Journalize and post any necessary adjusting entries at the end of 2019. (Hint: Items b, c, d, e, o, p, and q require adjustment.)
After the adjusting entries are posted, prepare the following:
- an adjusted trial balance,
- an income statement,
- statement of retained earnings, and
- a balance sheet for 2019.

The format of your statements should mirror those prepared by the company in 2018.

Journalize and post-closing entries for 2019 and prepare a post-closing trial balance.
Compute the Current Ratio and Debt to Total Equity Ratio for 2018 and 2019.
Interpretive Question: What is your overall assessment of the financial health of SMC, Inc.?

___________________________ Balance Sheet 2018

SMC, Inc. Balance Sheet December 31, 2018 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 December31,2018 Sales revenue .......................................................................................... $110,000 Rent revenue ........................................................................................... 1,000 Total revenues......................................................................................... $111,000 Less cost of goods sold........................................................................... 60,000 Gross profit ........................................................................................... $ 51,000 Less operating expenses: Supplies expense ............................................................................. $ 400 Salaries expense .............................................................................. 22,000 Miscellaneous expense................................................................... 4,100 26,500 Income beforetaxes................................................................................ $ 24,500 Less income taxes................................................................................... 3,675 Net income............................................................................................... $ 20,825 Earnings per share ( $20,825 / 10,000shares) $ 2.08 SMC, Inc. Post-Closing Trial Balance December 31, 2018 Debits Credits Cash ......................................................................................................... $34,500 Accounts Receivable............................................................................... 25,000 Inventory .................................................................................................. 10,000 Supplies ................................................................................................... Accounts Payable.................................................................................... 200 $12,000 Salaries Payable ...................................................................................... 1,000 Income TaxesPayable............................................................................. 3,675 Common Stock............................................................................................ 25,000 Retained Earnings ................................................................................... 28,025 Totals........................................................................................................ $69,700 $69,700