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As a recently hired accountant for a small business, SMC , Inc., you are provided with last year s balance sheet, income statement, and post

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 31,2023
Assets $44,500
Cash $28,000
Accounts receivable $15,000
Supplies $700
Total assets $88,200
Liabilities and stockholders equity
Liabilities:
Accounts payable $14,000
Salaries payable $2,500
Income taxes payable $3,275
Total liabilities $19,775
Stockholders equity:
Capital stock (10,000 shares outstanding) $35,000
Retained earnings $33,425
Total stockholders equity $68,425
Total liabilities and stockholders equity $88,200
SMC, Inc.
Income statement
For the year ended December 31,2023
Sales revenue $110,000
Rent revenue $1,000
Total revenue $111,000
Less cost of goods sold $60,000
Gross profit $51,000
Less operating expense:
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
Earnings per share ($20,825/10,000 shares) $2.08
SMC, Inc.
Post-closing trial balance, December 31,2023:
Cash: Debit: $44,500
Accounts receivable: Debit: $28,000
Inventory: Debit: $15,000
Supplies: Debit: $700
Accounts payable: Credit: $14,000
Salaries payable: Credit: $2,500
Income taxes payable: Credit: $3,275
Common stock: Credit: $35,000
Retained earnings: Credit: $33,425
Totals: Debit: $88,200 Credit: $88,200
You are also given the following Information that summarizes the business activity for the current year, 2024.
A. Issued 10,000 additional shares of common stock for $60,000 cash on January 1st.
B. Borrowed $25,000 on March 1,2024, from Downtown Bank as a long-term loan. The interest rate on the loan is 4% and interest for the year is payable on January 1,2025.
C. Paid $12,000 cash on April 1 to lease a building for one year.
D. Received $6,000 on May 1 from a tenant for one years rent.
E. Paid $4,200 on June 1 for a one year Insurance policy.
F. Purchased $3,500 of supplies for cash on June 15th
G. Purchased inventory for $125,000 on account on July 1.
H. August 1, sold inventory for $185,000 on account; cost of the merchandise sold was $120,000.
I. Collected $145,000 cash from customers accounts receivable on August 20th.
J. September 1, paid $95,000 cash for inventories purchased earlier during the year.
K. September 20th paid $34,000 for sales reps salaries, including $1,000 owed at the beginning of 2024.
L. Dividends for $9,500 were paid on October 20th.
M. The income taxes payable for the year of 2023 were paid on November 15th.
N. For adjusting entries, all prepaid expense are initially recorded as assets, and all unearned revenues are initially recorded as liabilities (this is just informational)
O. At year-end, $1,050 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 and adjusting entry to recognize the taxes owed for 2024. The corporate tax rate is 21% of the income before income taxes. On the excel spreadsheet provided, perform the following tasks using the information from SMC, Inc. provided above:
1. Journalize the transactions for the current year, 2024, using the accounts listed on the financial statements and other appropriate accounts.
2. Set up T-accounts and enter the beginning balances from the December 31,2023, post-closing trial balance for SMC. Post all current year journal entries to the T-accounts.
3. Journalize and post any necessary adjusting entries at the end of 2024.(Hint: Items b, c, d, e, o, p, and q require adjustment.)
4. 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 2024.
The format of your statements should mirror those prepared by the company in 2023(doesn't mean you will use the exact same account titles).
5. Journalize and post-closing entries for 2024 and prepare a post-closing trial balance.
6. Compute the Current Ratio and Debt to Total Assets Ratio for 2023 and 2024.
7. Interpretive Question: What is your overall assessment of the financial health of SMC, Inc.?

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