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, 2020

Assets

Cash .........................................................................................................$44,500

Accounts receivable ................................................................................28,000

Inventory ..................................................................................................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 December31,2020

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, 2020DebitsCreditsCash .........................................................................................................$44,500Accounts Receivable...............................................................................28,000Inventory ..................................................................................................15,000Supplies ...................................................................................................Accounts Payable....................................................................................700$14,000Salaries Payable ......................................................................................2,500Income TaxesPayable.............................................................................3,275Common Stock............................................................................................35,000Retained Earnings ...................................................................................33,425Totals........................................................................................................$88,200$88,200You are also given the following information that summarizes the business activity for the current year,2021a.Issued 10,000 additional shares of common stock for $45,000 cash on January 1st.b.Borrowed $25,000 on March 1, 2021, from Downtown Bank as a long-term loan. The interest rateon the loan is 5%and Interest for the year is payable on January 1, 2022.c.Paid $18,000 cash on April1 to lease a building for one year.d.Received $7,500 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 $130,000 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 repssalaries, including $2,500 owed at the beginning of 2021.l.Dividends for $9,500 were paid on October 20th.m.The income taxes payable for the year of 2020 were paid on November 15th.n.For adjusting entries, all prepaid expenses are initially recorded as assets, and all unearned revenuesare initially recorded as liabilities (this is just informational).o.At year-end, $1,050 worth of supplies are on hand.p.At year-end, anadditional $7,200 of sales salaries are owed, but have not yet been paid.q.Prepare an adjusting entry to recognize the taxes owed for 2021. The corporate tax rate is 21% of theincome before income taxes.You are asked to do the following on an excel spreadsheet:1.Journalize the transactions for the current year, 2021, using the chart of accounts listed on theexcel spreadsheet provided for the project.2.Set up T-accounts and enter the beginning balances from the December 31, 2020, 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 2021. (Hint: Items b, c, d, e, o, p, and qrequire adjustment.)4.After the adjusting entries are posted, prepare an adjusted trial balance, an income statement,statement of retained earnings and a balance sheet for 2021.The format of your statements shouldmirror those prepared by the company in2020.5.Journalize and post-closing entries for 2021 and prepare a post-closing trial balance.6.Compute the Current Ratio and Debt to Total Equity Ratio for 2020 and 20217.Interpretive Question: What is your overall assessment of the financial health of SMC, Inc.?Use theWord Document provided to answer this question.SMC, Inc.Post-Closing Trial Balance December 31, 2020DebitsCreditsCash .........................................................................................................$44,500Accounts Receivable...............................................................................28,000Inventory ..................................................................................................15,000Supplies ...................................................................................................Accounts Payable....................................................................................700$14,000Salaries Payable ......................................................................................2,500Income TaxesPayable.............................................................................3,275Common Stock............................................................................................35,000Retained Earnings ...................................................................................33,425Totals........................................................................................................$88,200$88,200You are also given the following information that summarizes the business activity for the current year,2021a.Issued 10,000 additional shares of common stock for $45,000 cash on January 1st.b.Borrowed $25,000 on March 1, 2021, from Downtown Bank as a long-term loan. The interest rateon the loan is 5%and Interest for the year is payable on January 1, 2022.c.Paid $18,000 cash on April1 to lease a building for one year.d.Received $7,500 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 $130,000 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 repssalaries, including $2,500 owed at the beginning of 2021.l.Dividends for $9,500 were paid on October 20th.m.The income taxes payable for the year of 2020 were paid on November 15th.n.For adjusting entries, all prepaid expenses are initially recorded as assets, and all unearned revenuesare initially recorded as liabilities (this is just informational).o.At year-end, $1,050 worth of supplies are on hand.p.At year-end, anadditional $7,200 of sales salaries are owed, but have not yet been paid.q.Prepare an adjusting entry to recognize the taxes owed for 2021. The corporate tax rate is 21% of theincome before income taxes.You are asked to do the following on an excel spreadsheet:1.Journalize the transactions for the current year, 2021, using the chart of accounts listed on theexcel spreadsheet provided for the project.2.Set up T-accounts and enter the beginning balances from the December 31, 2020, 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 2021. (Hint: Items b, c, d, e, o, p, and qrequire adjustment.)4.After the adjusting entries are posted, prepare an adjusted trial balance, an income statement,statement of retained earnings and a balance sheet for 2021.The format of your statements shouldmirror those prepared by the company in2020.5.Journalize and post-closing entries for 2021 and prepare a post-closing trial balance.6.Compute the Current Ratio and Debt to Total Equity Ratio for 2020 and 20217.Interpretive Question: What is your overall assessmen