Case 1.3 Holton- Central Holdings Inc Prepar and record journal entries for Holton-Central's sale of stock, incurrence of debt, and the 18 activities listed above.Prepar a balance sheet as of December 31, 2009, an income statement, and statement of cash flows for the period July 1, 2009, through December 31, 2009.Evaluate Holton-Central's performance during its first six months of operations.

SECTION ONE INTRODUCTORY CASES beginning July 1, 2010. Also due each July 1, beginning July 1, 2010, was 10% interest on the unpaid balance as of the previous July 1. 3. Holton-Central Holdings paid $4,765,000 cash for the assets of Holton-Central Inc., and assumed the firm's $875,000 of accounts payable. July 2, 2009-December 31, 2009 Mr. Cardell's first action was to close four furniture showrooms in Chicago, Los Angeles, New York, and Atlanta, because the leases had been cancelled in bankruptcy. These closures would save $950,000 annually; Mr. Cardell believed sales would decline only marginally. He also negotiated a more favorable labor contract with former employees, which would save another $750,000 annually. On July 2, 2009, the firm reopened for business. The following is a summary of Holton-Central's activity for the second half of 2009: 1. Paid the $875,000 of accounts payable. 2. Paid $154,500 for utilities, professional services, and other administrative expenses. 3. Paid $1,408,000 for office wages and related payroll taxes and benefits. 4. Paid $2,785,000 for selling and marketing expenses. 5. Paid $900,000 for production machinery. The machinery was purchased October 1, 2009. The machinery had a useful life of five years with no salvage value. 6. Paid $228,000 for various one-year insurance policies. 7. Purchased $5,345,000 of raw material; $835,000 was unpaid as of December 31, 1998. 8. Manufacturing records showed $4,935,000 of raw material transferred to work in process. 9. Paid $7,878,000 in cash for production wages and charged the costs to work-in- process inventory. 10. Charged $6,662,000 to work-in-process inventory for manufacturing overhead items, including $6,400,000 paid in cash and $262,000 for depreciation on manufacturing facilities. 11. Manufacturing records showed $19,123,000 of work-in-process inventory transferred to finished goods inventory. 12. Sold chairs for $25,563,000. Of that, $4,587,000 had not been paid as of December 31, 2008. 13. Manufacturing records showed cost of goods sold of $18,593,000. 14. Recorded depreciation expense of $86,000. 15. Recorded accrued interest expense. 16. Recorded insurance expense of $95,000. 17. In late December, Mr. Cardell received a call from Holton-Central's largest customer. To cut costs, previous management had substituted a low-grade fabric on 1,800 chairs that the customer purchased in 2008 and 2009. Repairing those chairs would cost $360,000. Mr. Cardell estimated that customers would request repairs to another several thousand chairs, which would cost another $560,000. Although that liability was discharged in bankruptcy, Mr. Cardell believed failure to repair the chairs would irreparably damage the firm's reputation. He notified customers that Holton-Central would repair the chairs at no cost. 18. Computed income tax expense of $365,000 for 2009, payable in 2010