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Blue Spruce Corp.s balance sheet at December 31, 2016, is presented below. BLUE SPRUCE CORP. Balance Sheet December 31, 2016 Cash $30,900 Accounts payable $13,100
Blue Spruce Corp.s balance sheet at December 31, 2016, is presented below.
BLUE SPRUCE CORP. Balance Sheet December 31, 2016 | ||||||
Cash | $30,900 | Accounts payable | $13,100 | |||
Inventory | 30,300 | Interest payable | 2,500 | |||
Prepaid insurance | 5,900 | Bonds payable | 50,000 | |||
Equipment | 39,800 | Common stock | 26,300 | |||
Retained earnings | $15,000 | |||||
$106,900 | $106,900 |
During 2017, the following transactions occurred. Blue Spruce uses a perpetual inventory system.
1. | Blue Spruce paid $2,500 interest on the bonds on January 1, 2017. | |
2. | Blue Spruce purchased $243,800 of inventory on account. | |
3. | Blue Spruce sold for $490,000 cash inventory which cost $262,000. Blue Spruce also collected $29,400 sales taxes. | |
4. | Blue Spruce paid $232,000 on accounts payable. | |
5. | Blue Spruce paid $2,500 interest on the bonds on July 1, 2017. | |
6. | The prepaid insurance ($5,900) expired on July 31. | |
7. | On August 1, Blue Spruce paid $10,200 for insurance coverage from August 1, 2017, through July 31, 2018. | |
8. | Blue Spruce paid $16,000 sales taxes to the state. | |
9. | Paid other operating expenses, $88,000. | |
10. | Redeemed the bonds on December 31, 2017, by paying $48,400 plus $2,500 interest. | |
11. | Issued $90,000 of 8% bonds on December 31, 2017, at 103. The bonds pay interest every June 30 and December 31. |
Adjustment data:
12. | Recorded the insurance expired from item 7. | |
13. | The equipment was acquired on December 31, 2016, and will be depreciated on a straight-line basis over 5 years with a $3,100 salvage value. | |
14. | The income tax rate is 30%. (Hint: Prepare the income statement up to income before taxes and multiply by 30% to compute the amount.) |
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